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14 Apr 2015
No threat for any possible UK deflation – BTMU
FXStreet (Barcelona) - Derek Halpenny, European Head of GMR at Bank of Tokyo-Mitsubishi UFJ, notes that the UK inflation release today risks a dip into negative territory, with falling energy prices expected to be the prime cause.
Key Quotes
“One of the key events today during the European trading session will be the release of the inflation data for March. I say inflation, but of course there is a risk that we see the annual rate drop from 0.0% recorded in February into negative territory.”
“No doubt the UK media will make much of this “deflation threat to the real economy” but the reality is that any negative rate period for the UK will be fleeting.”
“Services inflation, while historically low at 2.4% in February, is still above the target for overall inflation and the story for the UK remains very much one of energy price deflation.”
“As BOE Governor Carney reminded us at the last QIR press conference, analysis of the breakdown of the inflation data shows a normal distribution of sectors recording falling prices versus sectors recording rising prices. The only difference now is that the sectors recording falling prices are falling harder than usual.”
“The conditions for higher inflation ahead remain in place. Earlier today we had the BRC/KPMG Retail sales data that revealed a pick-up in annual growth from 0.2% in February to 3.2% in March.”
“Sure, Easter fell in early April this year and probably lifted the March data with food sales on a 3-month inflation-adjusted basis, up 2.4%, the strongest since January 2011. Still, non-food sales also recorded strong nominal gains suggesting broader demand, perhaps un-related to Easter.”
Key Quotes
“One of the key events today during the European trading session will be the release of the inflation data for March. I say inflation, but of course there is a risk that we see the annual rate drop from 0.0% recorded in February into negative territory.”
“No doubt the UK media will make much of this “deflation threat to the real economy” but the reality is that any negative rate period for the UK will be fleeting.”
“Services inflation, while historically low at 2.4% in February, is still above the target for overall inflation and the story for the UK remains very much one of energy price deflation.”
“As BOE Governor Carney reminded us at the last QIR press conference, analysis of the breakdown of the inflation data shows a normal distribution of sectors recording falling prices versus sectors recording rising prices. The only difference now is that the sectors recording falling prices are falling harder than usual.”
“The conditions for higher inflation ahead remain in place. Earlier today we had the BRC/KPMG Retail sales data that revealed a pick-up in annual growth from 0.2% in February to 3.2% in March.”
“Sure, Easter fell in early April this year and probably lifted the March data with food sales on a 3-month inflation-adjusted basis, up 2.4%, the strongest since January 2011. Still, non-food sales also recorded strong nominal gains suggesting broader demand, perhaps un-related to Easter.”