UK Inflation to be stable in June

Global food price deflation pressures are seen continuing to mount which should push down UK food prices as well so we expect food deflation to deepen again. Against that, petrol prices rose again in June and more strongly than a year earlier so making a positive contribution to inflation. 

The UK June price data should show opposing influences cancelling each other out to leave the CPI inflation rate at 0.1% yoy. In May it was surprising to see food deflation ease by 1pp whilst food producer output price inflation was stable. 

"Goods inflation might stay at -1.2% yoy as the downward pressure from the strong pound continues but services inflation should increase slightly from 2.3% to 2.4% as the tightening labour market starts to have an impact. This should take core inflation from 0.9% to 1.0% yoy", predicts Societe Generale. 

Overall, the impact of commodity prices on the inflation rate should be zero. Core inflation should edge up. 

"The combination of stable commodity price inflation and a slightly higher core inflation rate should impart an upside risk to inflation. It should remain at 0.1% yoy with a risk of 0.2% yoy. RPI inflation should rise from 1.0% to 1.1% yoy", adds Societe Generale.