The inflation figures published last Tuesday confirmed that CPI remained unchanged for the third successive month in December at 2.7%. The largest upward pressure came from the price increases in utility bills but this was offset by downward pressure from air fares. Although there is some uncertainty around the near term outlook, our view is that inflation will start to creep up over the next few months before slowing later in the year.
Recentretail sales figures were weaker than predicted. UK sales fell at a seasonally-adjusted 0.1% in December from the month before. Although retail sales were up 0.3% in annual terms, it was slowest annual growth rate for a December since 1998 – with the exception of December 2010. These figures increase the risk that the ONS will announce a small negative figure for the fourth quarter this week.
