Inflation Remained Negative in the United Kingdom in October
Positive Indicators Drove US, German, and UK Market Indexes Up
Inflation stood at -0.1% in October
According to the UK Office for National Statistics, the annual inflation rate in the United Kingdom was -0.1% in October, unchanged from September 2015. On a month-over-month basis, consumer prices in the United Kingdom increased by 0.10% in October 2015.
With inflation staying lower, the iShares MSCI United Kingdom ETF (EWU) has fallen 3.4% over the past month as of November 16. Energy stocks such as BP (BP) and Royal Dutch Shell (RDS.A) have fallen 2.3% and 9.9%, respectively, over the past month as of November 16.
Apparel buying surges in October
The upward contribution to inflation in the last 12 months came from clothing and footwear and recreational activities. Clothing and footwear have risen 2.0% for September and October, while recreation and culture have risen 0.8% over the same period.
The decline in education spending by 3.6% for September and October has resulted in a reduction of inflationary pressure. The decline in food and non-alcoholic beverages by 0.4% led to the decline. Soft drink stocks such as Coca-Cola (KO) and PepsiCo (PEP) fell 0.79% and 1.4%, respectively, over the past month as of November 16.
Core inflation stood at 1.1% in October
The core inflation rate that tracks changes in the prices that consumers pay for a basket of goods, excluding volatile items such as food and energy products, came in at 1.1% in October 2015 on a year-over-year basis.
On a month-over-month basis, consumer prices in the United Kingdom rose by 0.1% in October. On a year-over-year basis, they fell by 0.1%. Depressing price levels aren’t good for economic growth. In the United Kingdom, apart from the stimulus package, more policy reforms may be required by the Bank of England in order to achieve the target inflation rate of 2.0%.
You may also be interested in reading Italy’s Trade Surplus Widened with Declining Imports in September.
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