UK Inflation Figures Lower Than Anticipated

Alan Penny

15 January 2020

3 min read

Brexit news

  • Consumer Price and Core CPI Index released
  • A good indication as to the health of the economy
  • PPI Input and Output released to indicate future of UK growth

Early during the Wednesday session, the British government released inflationary figures, in the form of Consumer Price Index year-over-year, and Producers Price Index month over month. These numbers will give a read on inflation in the form of the consumer and also give an idea as to what industrial businesses in the UK feel about the future as well. Furthermore, Core CPI year-over-year was released, which gives a reading of the typical consumers’ list of goods minus food and energy.

Economic activity slowing in the UK

The Consumer Price Index year-over-year came out as part of the bulletin at 1.3%, as opposed to the 1.5% anticipated. This shows that price pressure is abating, even though the British pound has taken a bit of a beating as of late. This could indicate that perhaps economic activity is slowing down slightly in the United Kingdom. That comes as traders pay attention to other concerns facing the country, such as Brexit and even now uncertainty with Iran.

price pressure is abating, even though the British pound has taken a bit of a beating

Core CPI year-over-year came out at 1.4%, as opposed to the anticipated 1.7% for the reading. This measures a basket of goods just like the CPI figures, but also eliminates volatile food and energy items. This is considered to be a more stable reading, and this also shows weakness in the United Kingdom.

The market also received the Producers Price Input Index figure at 0.1%, originally thought to be a reading of 0.2%. The output month over month number was flat. In other words, businesses in the United Kingdom are slowing down, albeit very slowly. It looks as if the United Kingdom is a bit sluggish, but that is not surprising considering that the markets have a whole host of issues to worry about.

UK doing well in rest of the world context

The British economy looks to be a bit sluggish, but when you take a look at the overall picture in the context of the global markets, Great Britain is doing reasonably well. After all, the UK is currently dealing with the Brexit situation, which in and of itself has been like a wrecking ball for the confidence of the British. Furthermore, the geopolitical situation around the markets continues to cause massive issues as well.

The global trade has been slowing down anyway, so although Great Britain has underperformed during this round of announcements, it’s unlikely that the British are going to pay too high of a price in the markets as a result.

This is just another sign that the global economy is starting to drift a bit lower, in a situation where market participants are looking for something a bit better than the rest. The British still have a way to go, but they also can offer quite a bit of value based upon the fact that the currency is extraordinarily low from a historical perception. Plus the stock markets should continue to offer value as well, especially considering that the United Kingdom is beginning to get more certainty over the longer term.

Written By
Alan Penny

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