UK Inflation: awaiting final Autumnal ascent
- UK CPI inflation disappointed the consensus again by holding at 2.6% in July, in line with my forecast. The underlying inflationary impulse and trend strengthened.
- Transport prices weighed most, as expected. The offsetting news in my forecast was from weaker games & toys and strength in car insurance and clothing. Payback looks set to occur in all of these areas between August and September.
- Weighting changes for 2017 shifted the underlying seasonality and may contribute to more market surprises. August is most extreme, with payback by November.
- I currently forecast CPI inflation of 2.65% y-o-y in August and for it to rise by about 20bp over the Autumn before subsiding during the winter. RPI inflation rises by about 0.1pp less in my forecast.
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