Another surprise fall in UK inflation muddies Bank of England rates message

Bank of England Governor, Mark Carney, attends the central bank's quarterly Inflation Report press conference in London, on May 10, 2018. The Bank of England on Thursday left its key interest rate at 0.50 percent as it slashed the growth forecast for the British economy less than one year before Brexit. The decision met expectations following a raft of gloomy economic data pointing to slowing growth and weaker inflation as Britain readies for its exit from the European Union in March 2019. / AFP / POOL / Frank Augstein
Updated 23 May 2018

Another surprise fall in UK inflation muddies Bank of England rates message

  • British inflation fell unexpectedly in April, according to figures on Wednesday
  • Consumer price inflation cooled to 2.4 percent last month

LONDON: British inflation fell unexpectedly in April, according to figures on Wednesday that added to doubts about when the Bank of England will raise interest rates again and pushed sterling to its lowest level against the dollar this year.
Consumer price inflation cooled to 2.4 percent last month, its weakest increase since March 2017, and down from 2.5 percent this March.
The figure was below economists’ average expectation in a Reuters poll for it to hold steady at 2.5 percent and represented the second surprise fall in a row after a drop in March’s figures. “It’s a conundrum for the Bank of England which has struggled to read the direction of price changes recently,” Ed Monk, associate director for personal investing at fund manager Fidelity International, said.
“With inflation trending lower, it only makes it harder for the Bank of England to raise rates.” Investors were now pricing in a one-in-three chance of a BoE rate hike in August — the next time it updates its forecasts on the economy — down from 50/50 before Tuesday’s data.
High inflation, caused by the pound’s drop after the 2016 Brexit vote, squeezed British consumers through last year, and although it has receded from its December peak of 3.1 percent, the BoE is keeping a close eye on price pressures.
PIPELINE PRESSURE
Wednesday’s data pointed to some signs of inflation pressure still in the pipeline. Prices of goods leaving British factories increased at a faster rate than expected last month. And while consumer price inflation cooled again, the timing of the Easter holidays and their impact on air fare prices was a big contributor.
On Tuesday Bank of England Governor Mark Carney cited a new sugar tax on soft drinks, as well as higher utility bills and petrol prices, as reasons why inflation “probably tips up a bit” in the coming months before resuming a decline. The ONS said soft drink prices increased sharply over the last couple of months but the overall impact on inflation was minimal.
The latest data on prices in British factories, which eventually feed through onto the high street, were stronger than anticipated. Manufacturers increased the prices they charged by 2.7 percent year-on-year, matching March’s increase. Economists had expected a fall to 2.3 percent. Among manufacturers, the cost of raw materials — many of them imported such as oil — was 5.3 percent higher than in April 2017, up sharply from an increase of 4.4 percent in March and suggesting a long run of weakening price growth has ended.
A surprise drop in consumer price inflation in March, along weak economic growth figures for early 2018, had called into question whether the BoE would raise interest rates more than once before the end of the year.
Earlier this month it refrained from an interest rate hike that had at one point been widely expected. The BoE’s latest forecasts show inflation dropping to 2.1 percent in a year’s time, and returning to its 2.0 percent target a year later — but only if interest rates rise by 25 basis points about three times over three years.
The latest Reuters poll of economists suggests the BoE is most likely to raise interest rates at its August meeting.


Saudi Aramco iktva forum kicks off in Dhahran

Updated 3 min 2 sec ago

Saudi Aramco iktva forum kicks off in Dhahran

DHAHRAN: Saudi Aramco’s 5th annual iktva (In-Kingdom Total Value Add) forum kicked off on Monday at the Dhahran Expo center, with over 70 exhibitors, 14 government entities, and 8 international energy partners all present at the mega-event.

Iktva was launched by Saudi Aramco in 2015 to drive increased levels of localization in its supply chain. 

Amin Nasser, President and CEO of Aramco, highlighted the success of the event and how the forum has contributed to the kingdom’s reputation internationally and locally.

“The iktva Forum and Exhibition 2020 represents an ideal opportunity to continue to build on the enormous progress which has already been made in creating an integrated supply chain for the oil field service industry, serving not just the Kingdom but the entire region. As you know, we take great pride in our low-cost production, and our reputation for reliability. A first-class supply chain is a critical factor that makes both possible,” he said.

He also indicated that the success of the event could be seen in the numbers.

“For the first time, the majority of our procurement is from in-kingdom: 56 percent to be exact. Our suppliers have tripled their local purchases of goods and services, their employment of Saudis is up 50 percent, and female employment has increased by almost a third. Our suppliers are exporting 50 percent more from the kingdom, because of iktva,”

Aramco signed 66 initial agreements and strategic and commercial collaborations valued at more than $21 billion with international partner companies and entities from 11 countries in several industrial and business sectors across the Saudi Arabian energy sector.

In addition, a joint venture agreement with Baker Hughes was also signed. The joint venture will be a multi-sectorial non-metallic investment platform designed to innovate, develop and manufacture composite materials for both oil and gas as well as non-oil and gas applications.

The venture will leverage polymer materials and state-of-the-art manufacturing processes to deliver transformational non-metallic products, starting with reinforced thermoplastic pipes. The JV facility will be located at the King Salman Energy Park (SPARK), and will serve the MENA region. 

Launched in 2015, iktva has become one of the Kingdom’s most important and strategic programs focused on developing the energy sector and creating of a world-class supply chain. The program aims to reach 70 percent local content, increase exports of Saudi-made energy goods and services, and create thousands of technical and professional jobs and careers