Bottom line: The October CPI rose 0.3%, much more than the consensus forecast of 0-0.1%. However, other than highlighting yet again the inability of the forecasters to handle the fluctuations stemming from seasonal factors, the latest data have no long-term significance. But they are sufficient to neutralize the yammering on the part of some analysts for another interest rate cut – at least until early 2014.
- The main items behind the CPI’s rise were seasonal: fruit & vegetables – especially tomatoes (+64%!) and clothing and shoes (move to winter wear);
- The TTR (12-month trailing rate, i.e. the rate of inflation in the 12 months ending in October) rose to 1.8%, well above the analyst consensus of 1.5%. But the rate of inflation in January-October 2013 was higher, at 2.1% — reflecting low inflation in late 2012.
- The overall increase of 0.3% masks a sharp divergence between inflation rates for the rich vs the poor. For the highest quintile of the population (measured by the level of disposable income per person), the October CPI rose by only 0.1%, because the relative weight of fruit and vegetables in these people’s spending basket is low, whereas petrol prices (which fell) are an important item. On the other hand, for the lowest quintile, the CPI rose by 0.5% — for the opposite reasons.
- The Producer Price Index (PPI) fell by6 1% in October, mainly due to the fall in oil prices.