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U.K. Inflation Steady At 2.7%

U.K. Inflation Steady At 2.7%
12/18/2012 6:55 AM ET

U.K. annual inflation held steady in November at the highest level since May on increases in food and energy bills, official data showed Tuesday.

Consumer price inflation stabilized at 2.7 percent in November, figures from the Office for National Statistics revealed Tuesday. Inflation was at a 34-month low of 2.2 percent in September.

The November rate came in line with economists' expectations, but continues to hover above the 2 percent target. The highest upward impact on inflation was from food prices and utility charges, while fuel prices exerted downward pressure.

Core inflation that excludes energy, food, alcoholic beverages and tobacco, also remained unchanged at 2.6 percent in November. The rate was forecast to rise marginally to 2.7 percent.

As inflation is set to stay between 2.5 percent and 3 percent for the best part of the next year due to increases in utility and food prices, the squeeze on households' spending power looks likely to persist throughout 2013, said Samuel Tombs at Capital Economics. Nonetheless, inflation will eventually fall to a very low rate.

IHS Global Insight's Chief UK economist Howard Archer said he expects consumer price inflation to fall to 2.2 percent by the end of 2013 and finally below 2 percent in 2014.

Month-on-month, consumer prices increased at a pace of 0.2 percent, in line with forecast, but slower than a 0.5 percent rise in October, data showed.

Retail price inflation, at the same time, slowed to 3 percent from 3.2 percent in October. Mortgage interest payments had a downward impact on the annual change.

Excluding mortgage interest payments, retail prices climbed 2.9 percent annually, down from 3.1 percent a month ago. Economists had forecast the annual rate to remain at 3.1 percent.

In a separate communique, the statistical office said factory-gate inflation slowed in November. Output price inflation fell to 2.2 percent in November from 2.6 percent a month ago. It was forecast to ease to 2.5 percent.

Meanwhile, core output price inflation that strips out food, beverages, tobacco and petroleum, held steady at 1.4 percent.

Annually, input prices slipped 0.3 percent in November after staying flat in October. On a monthly basis, the input price index edged up 0.1 percent, the same rate as seen in September and October.

by RTT Staff Writer

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