UK inflation turns positive again - business live

Discussion in 'Market News' started by Lily, Dec 15, 2015.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
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    Britain’s consumer prices index crept above zero last month to 0.1%, despite cheaper petrol and food

    12.16pm GMT

    Page 21 of today’s inflation report contains a detailed breakdown of the Consumer Prices Index, showing how prices of key items rose (or fell) in the last year.

    Here’s a flavour:

    11.48am GMT

    Here’s our news story on this morning’s inflation figures, by Heather Stewart:

    UK inflation nudged back above zero last month for the first time since July, with prices rising by 0.1%.

    Plunging global commodity prices have meant that inflation has been unusually weak in historic terms through much of 2015, and despite November’s 0.1% increase, the consumer prices index (CPI) shows that the price level across the economy stood barely higher than at the end of last year.

    Related: UK inflation moves above zero

    11.39am GMT

    With inflation so low, UK workers are currently enjoying real wage increases of around 2.5% to 3%.

    That’s bringing some relief after the long cost-of-living squeeze after the financial crisis began.

    Employees may begin to demand higher wage increases in cash terms once prices begin to go up and they feel the pinch on their disposable incomes. When this occurs, employers and staff will be under even more pressure to raise productivity to pay for sustainable wage rises.

    The thinktank considers the impact of five different scenarios for productivity and prices on median hourly wage growth in 2016. On its best case, faster-than-expected productivity growth of 2% and prolonged low inflation that rises to just 1% by the end of the year could result in the fastest real wage growth for more than a decade at around 3%.

    But if productivity growth holds at 1.3% and inflation grows more quickly than forecast to hit the Bank’s target of 2% by the end of the year, the pace of real wage growth could drop to 0.9%. That would leave workers waiting even longer to return to the kind of pay rises they enjoyed before the downturn.

    Related: UK pay rises likely to fade fast, thinktank warns

    11.29am GMT

    Andy Scott, economist at money transfer company HiFX, is also in the growing band of experts who believe UK interest rates will remain at record lows for many months, thanks to weak inflation.

    “We seem to be experiencing the effects of a slowdown in a number of producing countries, especially China, that are forcing prices lower.

    We expect this situation to continue into next year and for the Bank of England to therefore maintain rates where they are until the back end of next year, possibly into 2017 depending on whether OPEC decide to intervene to lift oil prices.

    11.18am GMT

    Low inflation and cheap oil is a double-dose of pre-Christmas cheer for consumers, says Chris Williamson, of financial data provider Markit:

    “This is clearly good news for consumers in two respects: low prices boost spending power and the dovish outlook for inflation takes pressure off the Bank of England from hiking interest rates any time soon.”

    11.17am GMT

    Cheaper oil prices may push the UK back into negative inflation soon. But rather than fuelling panic about deflation, it would be positive for the economy overall.

    Kallum Pickering of Berenberg Bank explains:

    This is not a serious risk to the economy. As a net importer of oil the UK benefits when prices fall. Especially when some of these cost savings are passed onto households.

    10.50am GMT

    The cost of a house in Britain continues to surge much faster than the headline inflation rate.

    It’s a fresh blow to those trying to get on the housing ladder, and one expert says the chancellor is partly to blame.

    ‘These figures reinforce the findings of other recent surveys, demonstrating that the housing market is heading towards a boom and bust that the government is partly responsible for but said it wanted to avoid.

    ‘The boom is being engineered because investors and second homeowners are rushing to buy before April and avoid higher stamp duty. Afterwards, we will see a much quieter market, with rising rents and affordability becoming more stretched as lending criteria tightens and interest rates potentially rise.’

    10.38am GMT

    This chart shows how the record-breaking monthly drop in clothing prices in November had the biggest impact on inflation last month.

    10.21am GMT

    Our video team have pulled together a handy explanation of what inflation is, how it’s calculated, and why it can be a problem....

    10.18am GMT

    Today’s inflation report doesn’t capture the latest plunge in the oil price (which came close to its 2008 lows yesterday).

    “The value of a barrel of Brent crude has now tumbled below $40 (£26.39), which is the lowest it has been since the financial crisis. Motorists have already seen the savings from lower wholesale petrol prices being passed on at the pumps. Britain’s largest supermarkets have cut their petrol prices to less than a £1, the first time they have gone below this “magic” threshold for six years, in the hope that this can lure in customers during this crucial festive period. The pressure is now on the non-supermarket forecourts to follow suit.

    “This oil price drop should eventually filter through into savings on utilities bills, which will be particularly welcome as we enter into the coldest months of the year.

    10.03am GMT

    Maike Currie, associate investment director at Fidelity International, reckons Britain’s inflation rate will turn negative again soon:

    “Today’s move into positive territory is likely to be short-lived with the massive fall in oil prices and the supermarket discount wars likely to keep a lid on UK inflation as we head into 2016. I expect UK CPI to continue see-sawing around the zero-mark for the near future.

    “Deflation is a double-edged sword which can have wreak economic havoc but can also kick start regenerative economic forces. The positive side effects of deflation as manifested in fuel in food prices is that it provides a boost to real incomes. In both the US and UK, falling prices coupled with a strengthening labour market, resulting in job and wage growth, raises real incomes.

    9.58am GMT

    UK consumers enjoyed a record-breaking fall in clothing sales last month.

    Today’s report shows that prices fell by 0.1% between October and November -- the first monthly fall of this type since records began in 1996. It follows the largest September to October price increase on record.

    ....price movements for a broad range of outerwear (particularly women’s trousers) with more products on sale this November than a year ago.

    9.45am GMT

    The inflation report is packed with nuggets, explaining why the cost of living turned positive last month.

    Transport has less of a drag on inflation, because it’s now more than a year since petrol prices began to fall sharply (so this effect starts to ‘drop out’ of the inflation report).

    9.44am GMT

    The broad picture is that Britain’s inflation rate has been bobbing around zero this year:

    UK annual inflation positive for the first time in 4 months. Hasn't been higher than 0.1% since January

    9.35am GMT

    First positive inflation data in UK since July...but at +0.1%, still WAY off 2% target

    9.34am GMT

    9.32am GMT

    Breaking: The UK has broken out from negative inflation, just!

    Prices rose by 0.1% annually in November, according to the latest data from the Office for National Statistics.

    9.23am GMT

    With typical prescience, rating agency Moody’s has slashed its forecast for oil prices next year and predicted a ‘prolonged period of oversupply’.

    “It will take time for these large global inventories to unwind, and combined with the possibility of new supply coming online from Iran, we expect oil prices to remain lower for a longer period than previously anticipated.”

    9.06am GMT

    Conner Campbell of SpreadEx says traders are hoping that the oil market won’t dominate the agenda again today:

    After a jittery, commodity-driven plunge on Monday, one that left the FTSE at 3 year lows, the markets will be hoping Tuesday’s busy day of data can distract investors from any further twists in the price-upsetting oil saga.

    8.54am GMT

    Australian traders would be forgiven for reaching for a few cold beers tonight, after seeing stocks hit their lowest level since the middle of 2013.

    From Melbourne, my colleague Martin Farrer explains:

    The Australian share market has slipped to its lowest level for more than two years after the benchmark ASX/S&P 200 index suffered its sixth successive day of losses.

    After a volatile day’s trading on Tuesday, the index closed down 0.39%, or 19 points, at 4,909.6 points, its lowest point since July 2013.

    Related: Australian share market hits two-year low after sixth straight day of losses

    8.41am GMT

    A healthy rally is underway across Europe this morning, despite the prospect of a historic US interest rate hike tomorrow evening.

    The main indices are all in the green, up by around 1.5%, with traders holding their nerve as they await the conclusions of the Fed’s two-day meeting which begins in a few hours.

    The overriding feel I am getting is that traders want to buy risks assets again, but they are too concerned about being long in a market where traders genuinely inherit a belief of a policy mistake from the Federal Reserve.

    8.21am GMT

    Shares are rallying in London at the start of trading, as investors regain their nerve after yesterday’s wobble.

    The FTSE 100 index of major blue-chip companies has bounced by 1.3%, recovering more than half of yesterday’s losses and reversing a long slump. Other European markets are also rallying....

    The positive opening comes thanks to a positive US close as a depressed oil price regained some composure from seven year lows courtesy of a weaker US dollar.

    It follows a weak Asian session with investors on edge as the Fed begins the two-day FOMC meeting that could culminate in the first US rate hike in nigh on a decade with repercussions from emerging markets to high yield debt.

    8.02am GMT

    We have new evidence that Volkswagen’s sales have been dented by the emission scandal.

    7.49am GMT

    Britain’s brief flirtation with falling consumer prices could end today, when November’s inflation report is published at 9.30am.

    Inflation was minus 0.1% in October and September, but has probably turned positive again now.

    The rate has been pulled down sharply by a combination of tumbling global commodity prices, from oil to food, and the effects of a strong pound, which makes imports cheaper.

    But economists say that inflation probably returned to positive territory last month, mainly thanks to so-called base effects – falls in petrol and alcohol prices were smaller this November than a year earlier.

    Related: UK inflation expected to turn positive

    7.35am GMT

    Good morning, and welcome to our rolling coverage of the world economy, the financial market, the eurozone and business.

    America’s top central bankers will gather in Washington, DC, today to start what could be a historic two-day policy meeting. Markets currently reckon there’s a 76% chance that the Federal Reserve will take the plunge and hike borrowing costs from the current record low on Wednesday, for the first time in nearly a decade.

    Barring a massive shock, it’s highly likely the Fed will raise rates 25bp this week. With scant exception, it is universally broadcasted and already widely priced in. Therefore, investors will be focused on the Fed’s forecasts, notes and tone.

    Given the deflationary impact of asset prices adjusting to the US hiking cycle; USD strengthening, oil / commodities falling and general weakness in global demand and data on uncertainty, we anticipate a dovish, gradual steepening strategy will be communicated.

    European #stocks to rebound this morning according to #futures. +1.3% after 5 days of losses

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