UK Inflation Tops Expectations

While ongoing concerns about the impact of the referendum decision have seen worsening economic fundamentals prevail in certain areas of the economy, namely construction and real estate, one area that has surprisingly strengthened is inflation.  After over a year of disinflationary pressure and a deflationary environment circling advanced economies across the globe, the UK saw consumer and producer prices pick up during the month of June.  Annualized headline consumer prices rose to 0.50% during the month of June from the 0.30% reported during the prior release.  Although monthly producer prices saw the pace of gains decelerate, input prices for producers fell by only -0.50% year over year, versus the -4.40% contraction reported in May.  However, despite this resounding positivity towards trends in prices, it may complicate the Bank of England’s efforts to accommodate the economy.  EURGBP is mostly unchanged on the session, trending near yesterday’s closing price of 0.8405.

Data released late in the session by the American Petroleum Institute sent oil prices sliding after reporting another 805,000 barrel build in gasoline inventories.  Although inventories for unrefined oil did fall again, marking 9-straight weeks of drawdowns, it was not enough to overcome the idea that gasoline purchases are not as strong as anticipated despite heightened seasonal demand while supplies continue to climb.  Part of this can be attributed to higher refinery output and capacity in the US along with more exports of refined products from Asia hitting American shores in an effort to find a buyer for the surplus output.  While oil prices spent the earlier part of yesterday’s session trending sideways, the news from API sent West Texas Intermediate futures back below $45.00 per barrel to the lowest levels since July 11^th ahead of today’s numbers set to be released by the Energy Information Administration.