UK CPI inflation in November was back in positive territory for the first time since July . It increased to 0.1% y/y in November from -0.1% y/y in October. Core inflation increased to 1.2% y/y in November from 1.1% y/y in October. Looking at the details, 'Services', 'Food, Alcoholic Beverages and Tobacco' and 'Energy' contributed positively to the increase in headline inflation while 'non-Energy Industrial Goods (NEIG)' did not contribute either positively nor negatively.
We recently moved our expectations for the first BoE hike to Q2 16. We believe it will now probably in May (previously Q1 16, February). The main reason is the lower oil price, which has lowered the UK inflation outlook, and the current poor risk environment.
Watch out for the labour market report for October, which is due out tomorrow. We estimate that average weekly earnings excluding bonuses (3M average) declined to 2.3% y/y in October from 2.5% y/y in September, mainly due to a combination of an odd jump in earnings in September 2014 and zero growth in earnings in August and September this year. We estimate that the unemployment rate (3M) was unchanged at 5.3% in October.