News Worms
News Worms


United Kingdom inflation rises less than expected, producer prices soar

Despite recognizing that retail inflation has fallen to its lowest level in two years, the Reserve Bank of India (RBI) last Wednesday surprised the market by holding policy rates unchanged and shifting its stance from accommodative to neutral, blaming stubborn non-fuel, non-food inflation.

As per the data, food inflation basket witnessed contraction for the second month in a row with inflation at (-) 0.56 per cent in January as against (-) 0.70 per cent in December.

Figures released by the U.S. Labor Department said on Tuesday its producer price index for final demand jumped 0.6% last month, the biggest hike since September 2012 and followed a 0.2% rise in December.

China's producer prices rose faster than expected in January while consumer inflation quickened, reinforcing views that economic growth is firming up and putting the central bank's policy moves in focus.

On the other hand, the index for fuel and power (weight 14.91 per cent) rose by 4.7 per cent to 201.2 from 192.1 for the previous month due to higher prices of coking coal, aviation turbine fuel, furnace oil, high speed diesel, petrol, bitumen and kerosene.

January also saw its largest 12-month CPI increase in almost five years, rising 2.5 percent over January 2016.

Inflation has been climbing as the fall in the pound - which makes imported goods more expensive - pushes up costs. Excluding shelter costs, which rose 3.5 percent between January 2016 and January 2017, core inflation would've been only 1.3 percent. This was below analysts expectations of a rise to 1.8 percent.

True Potential deputy chief investment officer Chris Leyland warned the rising figure - not matched by rising interest rates from the BoE - would continue to hit savers hardest.

The rise in WPI is in contrast to the fall in retail inflation to a five-year low of 3.17 percent in January.

Meanwhile, Yellen's positive remarks regarding the growth of the US Economy boosted optimism on the upcoming USA retail sales and inflation data to be published on Wednesday along with the inflation rate and automobile sales which rose by 0.4% last month. It was the largest monthly increase in over a year.

It had been falling for more than two years amid a supermarket price war, but this now appears to be grinding to a halt. It is just a comment that CPI (consumer price index) excluding food and fuel has been hard to bring down.

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