U.K. CPI inflation likely accelerated in August, expected to continue marching upwards

The U.K.’s August inflation rate is expected to have been impacted by non-core and core factors, said Societe Generale in a research note. In the previous month, core inflation decelerated to 1.3 percent year-on-year; however, the gradual influence of the recent weakening of the pound is expected to start being felt in non-energy industrial goods prices that should have pushed up the rate to 1.4 percent year-on-year in August, according to Societe Generale.

In the non-core, there is increasing and solid evidence of the exchange rate impact pushing up prices of food imports. However, it is surprisingly that it has not yet being expressed in consumer food prices, but it is uncertain if it can last much longer. Therefore, food price deflation is likely to have eased a tad to -2.3 percent year-on-year from -2.6 percent year-on-year.

In August, prices of petrol declined 2.2 percent in sequential terms; however, on a year-on-year basis, prices dropped 3.3 percent. This is expected to contribute positively to inflation as well. Overall, U.K.’s consumer price inflation is likely to have accelerated to 0.7 percent year-on-year from 0.6 percent, added Societe Generale.