UK dips into negative inflation

UK stocks have risen in early trade after inflation data showed that the UK has posted a negative inflation reading for the first time since 1960. Mark Carney last week said that although the CPI rate would start to move closer to the 2% benchmark quicker than expected, we could well see deflation in the UK this year.

Many expected a push higher in oil prices to show a slight uptick in the CPI reading. In the last month oil has topped above $60 a barrel and a continuation in the upward trend would lead to stronger headline inflation figures around the world. Today’s number shows two things, one being that despite efforts to overt the deflationary pressures many central banks are powerless against the fall, secondly that despite oil price fluctuation inflation is still dipping lower.

However with all of the above acting as factors in the global fall in inflation we must remember that we are talking about very small margins. Today’s number has only shown a -0.1% tick lower, which is nothing. To see the full effects of deflation on the UK economy we would need to see a much deeper figure for a sustained period of time, what we are currently seeing is rather negative inflation than full blown deflation. Mark Carney has already indicated that we were likely negative inflation in 2015 before the CPI reading starts to improve.

Elsewhere this morning we have seen Vodafone show a return to growth for Q4 beating analyst expectation. However the prospect of M&A in sector remains a big concern for shareholders, BT is in the process of a deal for mobile comms firm EE and the increased competition could leave Vodafone vulnerable on a number of levels.

Deutsche Bank has said that it is strategically thinking about a move of its British divisions to Germany should the UK exit the EU. Talks of the UK exit from the EU have heightened after the Conservative election victory and have somewhat spooked business’.