LONDON (Reuters) - LONDON, Dec 18 (Reuters) - Consumer price inflation unexpectedly remained at its highest level since May in November, but factory-gate inflation dropped to its lowest since July, official data showed on Tuesday.
KEY POINTS
- Annual CPI inflation remains at highest since May 2012
- Annual core CPI inflation remains at highest since Jan 2012
- Lowest annual rate of furniture and household equipment price inflation since March 2008
- Highest all services inflation since Dec 2011
- Lowest annual rate of producers' fuel cost inflation since Feb 2011
- Highest annual rate of producers' imported food cost inflation since Dec 2011
ECONOMISTS' VIEWS
ROB WOOD, BERENBERG BANK:
"UK inflation paused for breath in November before it resumes its assault on the 3 percent mark over the next few months. Inflation was unchanged at 2.7 percent in November, in-line with consensus expectations.
"The figures included the first of this winter's gas and electricity price rises, from Scottish and Southern Energy. Inflation will probably rise close to 3 percent by January as the increases by other utilities firms feed into the figures.
"With inflation accelerating and wage growth slowing, households' income is under relentless pressure. So consumption is not in a position to drive growth which means the UK is likely to stagnate in the near term. We think there will be a contraction in Q4, and a triple-dip is a distinct possibility.
"Inflation heading to three percent makes Bank of England policy easing in the next few months unlikely but we continue to expect them to announce more stimulus later in the year as growth comes in weaker than they expect and inflation starts to fall back again."
ALAN CLARKE, SCOTIABANK:
"It's broadly in line with expectations. Given that British gas wasn't included this month, it would have added another 0.1 percentage point, and whether it came this month, next month or the month after ... we know it is coming, and all utility providers together will add about 0.4 percentage points to inflation between now and January.
"Food also struck me as showing a very chunky increase, that also is going to add progressively to inflation over the next six months.
"It's a bit of a headwind to consumers, consumers have enjoyed a bit of an easing in the headwind or the squeeze on their disposable income, but that squeeze is intensifying. It's not going back to where it was at the peak, but it's a pinch nonetheless.
"Higher inflation makes it harder for them to restart QE. I don't think it makes any difference to the Bank. They know these things are outside of their control: Gas bills, droughts, they can't control that."
PHILIP SHAW, INVESTEC:
"No huge surprises on the CPI data. Food price inflation is a little higher than we expected and this is likely to be a recurring theme over the next few months."
"There are some upsides and downsides. We believe inflation will rise above three percent over the next few months. We feel a likely rise in inflation is going to result in the MPC keeping policy on hold, but much depends on how weak the economy is and if we were to see a very weak patch in activity then the MPC could look through a period of increased inflation rates.
"Our view is that GDP will rise modestly over the quarter, as it looks like we'll see a bounce back in construction.
"The PPI data looks satisfactory."
JENS LARSEN, RBC CAPITAL MARKETS:
"I was a little surprised on CPI because I was expecting utility prices to have less of an impact. There are still quite a lot of utility prices increases in the pipeline.
"RPI seems to be less of a surprise - and that is the number that's important for the linker market."
(Reporting by Li-mei Hoang)
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