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View the article online at http://citywire.co.uk/wealth-manager/article/a752215

CPI inflation ends 10 month slide with sharp uptick to 1.8%

by David Campbell on May 20, 2014 at 10:14

CPI inflation ends 10 month slide with sharp uptick to 1.8%

UK consumer price inflation (CPI) ended its ten month slide with a jump from 1.6% in March to 1.8% in April, but with producer price inflation still negligible the uptick is unlikely to be sustained.

In a month strongly affected by the relatively late date of Easter this year, transport costs such as airfares and fuels were the biggest gainer, rising 1.6% over the period.

‘This meant that prices for many goods (such as airfares) in April 2014 which were boosted by the Easter holidays were compared to a normal level of prices in April 2013,’ noted Samuel Tombs of Capital Economics.

‘Clearly, this boost to the annual inflation rate will unwind next month.’

Sterling nonetheless jumped to near a week-high of $1.685 versus the dollar, before rapidly falling back to $1.682. Gains versus the euro were more durable, holding at a year-to-date high of €1.228.   

Core factory gate prices continued to slow however, up just 1% over the year to April versus 1.1% in the year to March, suggesting that underlying pricing pressure continues to be marginal.

‘Price pressures in the inflation pipeline are still very weak,’ added Tombs.

‘Accordingly, we continue to think that CPI inflation should ease to as low as 1% by the end of this year and remain comfortably below the 2% target in 2015.’

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