Back to Counting Days & Barrels

Research evidence excerpt

Back to Counting Days & Barrels

IdeaM

Reading the Calendar

Inflation: Index day holds the key

Staring at the calendar: In June, the index day could be the 9th or the 16th, we think. We

have tended to follow the 2014 and 2015 calendars in the past two years, since these are

aligned with 2025 and 2026. We have called all index days over the past year correctly

with the exception of September. All in all, the methodology of mimicking 2015 index days

this year suggests price collection on June 9. Indeed, since 2010, index day in June fell after

the 15th just two times - in 2012 and 2020.

But the earlier index day and the late publication date mean a potential 6-week gap

between the two. The ONS has already allowed for this with the December data published

in late January. We are uncertain whether they would allow it twice, given that their

guidance suggests 5-week gaps as norm. With low confidence, we treat June 9 as our

base case index day. In this preview, we will reference a risk scenario with June 16 as the

alternative index day. Our high-frequency tracking suggests ~5bp higher headline CPI print

in case of a later index day, with an 8bp wider RPI wedge.

Food & energy inflation: Fuel and food prices are sampled as a monthly average. We use

a variety of sources to forecast month-ahead food inflation: BRC survey, WorldPanel

survey (formerly Kantar), euro area food inflation and weekly prices sampled online from

the UK's largest supermarket chain. The latter had been a good guide to CPI data prior to

the change in sampling (from survey to scanner data), but less so since February. Hence,

we now try to correct for all alternative information, and augment the high-frequency

tracking with online prices across other retail chains. Into the end of June, we notice a bit