Barclays raises 2017 UK CPI forecast, housing prices seen more resilient

Economists at Barclays revised their UK consumer price forecasts for 2017 higher to factor in the sharp weakening seen in the pound recently.

Headline consumer prices in Britain, one oft-used measured of the cost of living, were now seen advancing at a 2.3% year-on-year clip, fourth tenths of a percentage point more than their previous projection.

At the so-called 'core' level, excluding the volatile food, energy, alcohol and tobacco categories, that is, CPI was seen ahead by 2.1%, three tenths of a percentage above their previous estimate.

The retail price index was seen up by 3.1%, half a percentage point more than they had expected up until then.

Petrol prices and those for core goods were seen boosting CPI the most, Fabio Fois, Henry Skeoch and Andrzej Szczepaniak said in a research note sent to clients.

A degree of "firmness" was also anticipated in restaurant and hotel prices.

On the basis of post-referendum, data house prices in the UK were now also expected to be more "resilient", Barclays said.

CPI would peak at a 2.7% year-on-year clip in August 2017, the economists at Barclays said, versus forecasts from some other economists for a peak at about 3.5% at the end of 2017.

Within RPI, we have raised our forecast for the RPI-CPI basis in both 2016 and 2017 as we expect house prices in the UK to stay more resilient than our previous assumptions based on post-referendum data.