CPI Decreases Farther Than Expected for the UK

by on November 12, 2013 10:28 am GMT

The drop in inflation for the United Kingdom dropped harder than expected in October and reached a 13-month low, according to data released by the Office for National Statistics. Consumer-price fell 2.2 percent from 2.7 percent in September, and dropping .3 percent more than the average estimate made by economists.

The steep drop was reported to be due by sinking gas prices, transport costs and an increase in college tuition fees.

October’s inflation print is showing the continuing inaccuracies made by economists and even central banks of late. The Bank of England (BoE) projected inflation to exceed 2.8 percent for the rest of 2013. Since late 2009, the BoE has kept a two percent inflation target.

Inflation, ex-food, energy and alcohol, rose 1.7 percent. The lowest increase since 2009.

This data, coupled with the unemployment figures, Mark Carney will be reluctant to increase rates anytime soon. The United Kingdom did achieve quicker growth expansion the previous quarter of .8 percent, but output remains below 2008 levels.

Tomorrow, the BoE will release their inflation report and have a statement from the governor, Mark Carney. Also, the Claimant change and unemployment rate will be released. Weakness in both those indicators may start to cause problems for the central bank with unemployment hovering around 7.7 percent.

According to the ONS, housing in Britain increased by 3.8 percent and growth was mainly centered around London, were prices are higher 9.4 percent YoY.

The GBPUSD fell sharply, declining over 120 pips on the weaker than expected data. The GBPUSD is currently 1.5867.