UK exits deflation
The UK exited deflation in November driven by changes to oil prices, this morning’s figures from the Office for National Statistics have revealed.
After staying negative in September and October 2015 12-month inflation rose by +0.1% in November.
While oil prices fell by 1.1% in November a greater fall in the same period last year (-2.3%) pushed up the annual rate of headline inflation by almost 0.1%.
This year has been a sluggish one for inflation, as CPI dipped to -0.1% in April and hovered at the 0% mark for much of 2015.
Inflation peaked at $115pb in mid-2014 but has now fallen to $36 per barrel.
Capital Economics predicted inflation to rise to 0.2% in December before reaching 1% by April.
Paul Hollingsworth, UK economist at the research consultancy, said: “Inflation looks set to strengthen further over the coming months.
“Granted, oil prices have fallen back to around $36 per barrel over recent weeks which should feed through to lower petrol prices at the pumps in time.
“But sharper falls in petrol prices last year means that the annual rate of deflation should still ease.”
Alan Clarke, head of European fixed income strategy at Scotiabank, said: “Overall, we have probably left the negative inflation prints in the past and CPI inflation is on an upwards path – albeit a very gradual upwards path.
“Next month is going to be slightly tricky to judge. We see headline CPI inflation rising further – up to 0.2-0.3% year-on-year.
“Much of that is due to falls in petrol a year ago (down around 5%) exceeding the 2-3% drop this December.”