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UK inflation falls more than expected on late summer sales - ING

FXStreet (Łódź) - James Knightley from ING comments on the UK July inflation data which came in lower than projected at 1.6% on an annual basis mainly due to later than normal summer price discounting in clothing and footwear.

Key quotes

"That grouping saw prices fall 5.7% on the month, taking the annual price change for clothing and footwear down to -0.2%YoY from +2.4%."

"There was also aggressive price discounting in furniture & household equipment (-1.5%MoM) with food prices also dropping (-0.2%MoM) along with recreation & culture (-0.2%) and miscellaneous goods and services (-0.5%)."

"The largest upward impetus came from the transportation component (+1.3%MoM)."

"On the face of it this supports an on hold stance from the Bank of England."

"The combination of sterling strength (making imported goods cheaper), along with weak wage growth and lower energy prices, which are limiting business cost growth, means inflation looks set to remain contained for now."

"Indeed, today’s producer price numbers suggests an absence of pipeline inflation pressures in the economy."

"This further eases the pressure on the Bank of England to consider near-term interest rate rises and pushes the balance more in favour of a delay to rate hikes versus our current November official view for the first policy tightening move."

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