HALISTER1: Sterling Weakness Impact on CPI Still Small, More to Come: HSBC

Sterling Weakness Impact on CPI Still Small, More to Come: HSBC

(Bloomberg) -- Most of the impact of sterling’s fall after the referendum is still to make itself felt on U.K. inflation data, HSBC economist Elizabeth Martins writes in client note.
  • U.S. CPI inflation is expected to have risen 0.4 ppts in September and Chinese PPI inflation returned to positive territory for the first time in nearly 5 years this week, suggesting a base effect-driven inflation uptick which is visible globally
  • The first impact of GBP’s drop will come through petrol prices as global oil prices are on the rise again - as seen in the September number - and this will be exacerbated by the further falls in the pound in October
  • Anecdotal evidence, including the much publicized spat between Unilever and Tesco in October, point to cost rises in the pipeline, as do today’s PPI data
  • NOTE: It’s entirely possible U.K. inflation will reach 3% in 2017, and even 4% isn’t out of the question, CEBR says
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Source: BFW (Bloomberg First Word)

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Elizabeth Martins (HSBC Bank PLC)

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