February 14 2024
If you are covering the latest UK inflation data, please see the following comment from Lindsay James, investment strategist at Quilter Investors:
“Following what had been a period of steadily declining inflation, this morning’s data from the ONS reveals the UK saw another pause in the pattern of headline disinflation, with CPI at 4%, the same rate as in December 2023 and still double the Bank of England’s target.
“Higher gas and electricity prices lead the way as the primary driver of this uptick, with energy prices in January 2024 reported to be 18% lower than at the peak in January 2023, but 89% higher than in January 2021. However, this is in line with prior expectations and with the energy price cap set to decline in April, this should set the stage for headline inflation to decline more substantially in coming months.
“Core inflation, excluding energy, food, alcohol and tobacco, has been falling considerably slower than the headline rate, and progress here also appears to have stalled. It held steady at 5.1% in November and December, and once again refused to budge in January, driven in part by strong services inflation which rose from 6.4% to 6.5%. That said, the month-on-month data is more encouraging, and so this is unlikely to sway the Bank of England from its recent suggestion that interest rates have peaked.
“Yesterday’s UK labour market statistics revealed a further fall in wages, with annual growth in regular earnings (excluding bonuses) decreasing to 6.2% in October to December, down from 6.6% in the prior three-month period. However, while on the face of it this seems high, annualising the pattern over the past three months indicates that this is now falling quite quickly, with the annualised nominal growth rate of regular earnings running at 2.2% - rapidly nearing the Bank of England’s target and providing a little reassurance that this inflationary pulse is weakening.
“What’s more, tomorrow’s GDP data is widely anticipated to reveal the UK fell into a recession at the end of last year. Though Andrew Bailey has pushed back with an expectation that it will be both shallow and short lived, pressure on the Bank to cut rates sooner rather than later will no doubt continue, and today’s CPI data release will do very little to change that.”
