Steady UK Inflation, Falling Core Figure Dull Outlook For August Rate Hike

19 July, 2018, 15:53 | Author: Eric Barnett
  • Boxing Day sales

The ONS's inflation report showed that consumers have been contending with higher prices at the pump, with a recent jump in crude oil prices sending petrol up 2.7p per litre on the month to 128p per litre, while diesel rose 2.9p to 132.1p.

The cost of fuel rose to its highest level in nearly four years last month and held up the rate of inflation in the United Kingdom, according to the Office for National Statistics.

Ben Brettell, senior economist, Hargreaves Lansdown, said: 'All in all these numbers don't alter the economic picture of anaemic growth, a relatively tight labour market and under-control inflation. The measure of wholesale price gains is the key deflator in computing the Index of Industrial Production and is also used to deflate Gross Domestic Product at current prices.

He noted that 10 of the 12 largest energy suppliers - including British Gas, Scottish Power, EDF Energy - have announced price rises which will kick in over the summer.

This is the third month in a row that inflation has stalled at 2.4% and the 17th consecutive month it has exceeded the government's target of 2%.

The ONS reported the biggest month-on-month drop for a May to June period in clothing prices since 2012 as retailers slashed prices for the summer sales.

The ONS said that the price of clothing and footwear fell by 2.3% between May and June compared to a 1.1% decline in the same period a year ago.

Pay growth excluding bonuses, which the BoE says sometimes gives a better picture of the underlying trend, slowed by a similar amount, to 2.7 percent.

"Now it looks odds-on that the MPC will hold fire yet again". That's particularly the case after yesterday's wage growth data emerged weaker than expected. Multiple MPC members, including chief economist Andy Haldane and governor Mark Carney, had signalled that a rate hike will likely be necessary soon because of rising inflationary pressures.

Without the increased price of fuel, the ONS said, it is likely that the UK's headline rate of inflation would have dropped in the month, continuing a steady decline witnessed throughout 2018. It is now entirely possible that the Bank will delay until November or even next year'.

Therefore, the core rate of inflation slowed last month, falling below 1 percent for the first time since last March to 1.9 percent.

The Office for National Statistics said on Thursday that retail sales in June grew 2.9% on an annual basis, well under economists' forecasts of 3.9%. However, this was partially offset by the buoyant property market in the Midlands'.



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