CPI Inflation Grows to 0.6% in July

Compared on monthly basis, the overall prices of consumer goods and services in July witnessed a marginal increase of 0.8 percent against the previous month.

The UK’s Office for National Statistics (ONS) has announced that inflation in the UK rose in July up to 0.6%, a slender 0.1% increase from the figure for June, in the first inflation release since the decision to leave the European Union (EU).

Input prices that factories pay their suppliers rose 4.3% from July last year, their biggest annual rise in three years, compared with a 0.5% decline in June, with the main upward contributions coming from imported parts and equipment.

The wholesale price index rose 3.55 percent year-over-year in July, much faster than the 1.62 percent climb in June.

“The pound’s decline of more than 10% against both the euro and U.S. dollar since the June referendum has also contributed to a sharp rise in import prices, which climbed at their fastest pace since 2011 in the year to July”, said Chris Saint, senior analyst at Hargreaves Lansdown currency service.

The Consumer Price Index (CPI) measure of inflation rose to a higher-than-expected 0.5% in June after holding at 0.3% in April and May.

Tuesday’s tame inflation report from the Labor Department came in the wake of a soft July retail sales report last week that cast doubts on the US central bank’s ability to raise borrowing costs even as the labor market tightens.

Meanwhile, food and non-alcoholic drinks fell 0.2 per cent between June and July, which is lower than a 0.7 per cent drop over the period a year ago.

The US central bank raised its benchmark overnight interest rate in December for the first time in almost a decade.

US consumer prices were unchanged in July as a big drop in gasoline and other energy prices kept inflation under control. Energy prices fell by the largest amount in five months. “Inflation reached its highest rate for 20 months in July but is still short of the two per cent target”, he said.

Last month, the value of sterling slumped to a 31-year low against the dollar, having seen around 10 per cent of its value slashed. In July, the non-food manufacturing inflation measure stood at 0.1 per cent – turning positive for the first time since February 2015 – while CCII inflation, after entering the positive zone in December, was at 2.8 per cent. Analysts had expected the rate to remain unchanged at 0.5 percent.

It comes as new analysis suggests that ticket prices have increased at double the speed of wages since 2010. Instead the United Kingdom will have weaker sterling and higher prices as consumers are hit by expensive imported goods such as petrol’.

Barclays noted that while CPI was marginally higher than City expectations, it was in line with the Bank of England staff forecast as at the August 2016 Inflation Report.