UK Inflation Trends December 2024: Key Insights and Sectoral Dynamics
The latest release from the UK’s Office for National Statistics (ONS) presents a detailed overview of consumer price inflation as of December 2024. The report captures the trajectory of the Consumer Prices Index including owner occupiers' housing costs (CPIH) and the standard Consumer Prices Index (CPI), highlighting critical contributors, trends, and their implications.
Key Highlights
CPIH Overview:
Annual inflation rate: 3.5% in December 2024 (unchanged from November).
Monthly increase: 0.3%, a slight decline from 0.4% in December 2023.
Notable contributor: Owner occupiers' housing costs (OOH) rose by 8.0%, marking the highest increase since February 1992.
CPI Trends:
Annual inflation rate: Decreased to 2.5% in December from 2.6% in November.
Monthly increase: 0.3%, mirroring the trend seen in CPIH.
Sectoral Contributions:
Transport: A significant upward contribution driven by motor fuel prices and secondhand cars, despite airfares’ moderation.
Housing: Strong upward pressures from OOH costs.
Restaurants and Hotels: The division recorded the lowest annual inflation since July 2021, contributing to the downward trend in CPIH.
Core CPIH and CPI:
Core CPIH (excluding volatile categories such as energy and food): Rose by 4.2%, down from 4.4%.
Core CPI: Slipped to 3.2% from 3.5%, reflecting easing pressures in non-essential goods.
Notable Movements
Food and Beverages: A stable annual inflation rate of 2.0% indicates reduced volatility compared to the sharp peaks of early 2023.
Alcohol and Tobacco: Annual inflation eased to 5.3% from 6.8%, attributed to lesser impact from changes in tobacco duty.
Broader Economic Context
The report also provides comparative insights into inflation across the EU and G7 economies. At 2.5%, UK CPI inflation was above France’s 1.8% but below Germany’s 2.8%. This reflects nuanced pressures driven by domestic housing costs and transport dynamics.
The December 2024 inflation report underscores the UK’s progress in curbing inflation from its pandemic-era highs. However, persistent pressures from housing and transport demand continued vigilance. For households, tools such as the ONS’s personal inflation calculator provide valuable insights into personalized impacts of inflation trends.
This report serves as a critical resource for policymakers, businesses, and households in navigating the evolving economic landscape
Technical Overview
Price Levels:
Current Price: GBP/USD is trading near 1.2195, showing mild downward pressure.
Support Zone: Identified around 1.2101, providing a potential safety net for buyers.
Resistance Zone: Defined at 1.2245, which coincides with previous swing highs and aligns with the moving averages acting as dynamic resistance.
Trend Analysis:
The pair remains in a downward trend, with lower highs and lower lows evident since late December.
A descending trendline suggests continued bearish sentiment unless a breakout above resistance occurs.
Moving Averages:
The 200-period MA (black) is sloping downward, indicating long-term bearish momentum.
The 50-period MA (blue) and 100-period MA (purple) are converging near the price, which could act as resistance, especially as they align with the resistance level of 1.2245.
Inflation Data Impact:
The actual inflation rate (2.5%) was below the forecast (2.6%), which might weigh on the GBP due to reduced expectations of hawkish monetary policy by the Bank of England.
If inflation expectations remain subdued, further downside pressure on GBP/USD could be anticipated.
Support and Resistance Dynamics:
If the pair breaks above 1.2245, it could target higher levels, such as 1.2332, a previous pivot point.
On the downside, if the support at 1.2101 is breached, the next key level would be around 1.1787, which represents the low of the chart.
Conclusion and Outlook
The overall sentiment for GBP/USD on this timeframe remains bearish, with significant resistance at 1.2245 and strong support at 1.2101.
Bearish Scenario: A failure to breach resistance could lead to a retest of the 1.2101 level, potentially followed by a deeper decline toward 1.1787.
Bullish Scenario: If bulls can break above the 1.2245 resistance and sustain above the 200-MA, this could signal a reversal, targeting the next resistance at 1.2332.
