Of slightly more concern is the large increase in import prices which jumped 3.3% on a month on month basis, largely as a result of the decline in the value of the pound since the June Brexit vote, while the recent easing measures announced by the Bank of England could well drive these increases further in the coming months. We’ll get further colour on that in tomorrow’s wages data.
Advertisement
Similarly, Dell computer group said it now had to factor the cost of components, denominated in dollars, into the price of its products in Britain.
All eyes are now turning to food and property, which have been relatively unscathed, but which many fear could see similar price fluctuations.
“Inflation’s pickup, however, will gain strong momentum in 2017”, he said.
“The big issue is rather the impact of sterling’s weakness on import prices at a “high street” level, Smith continued”.
“Around 40 percent of food in the United Kingdom is imported”.
The latest United Kingdom inflation numbers for July came in slightly hotter than expected on an annualised basis driven by increases in the cost of transport as well as restaurants and hotels, though not by so much as to suggest that prices were likely to jump significantly higher in the coming months. However, if economic growth slows as many expect, then price rises are likely to be limited.
Elsewhere, the dollar plunged 1.22% against the yen to ¥100.02, after briefly dipping below the ¥100 threshold for the first time since Britain’s European Union vote.
While good news for tenants, it will leave landlords worse off.
However, the United Kingdom currency was on the back foot against the euro, falling 0.32% to a €1.1478, having previously touched a fresh three-year low of €1.1461.
United Kingdom inflation in July hit the highest level since November 2014, with the Consumer Prices Index (CPI), the official inflation measure, rising to 0.6 percent from 0.5 percent in June, according to recent data from the Office for National Statistics.
Analysts now believe that higher inflation readings in the next few months will do nothing to alter the BoE’s initial monetary policy outlook, with the idea that a lower currency is likely to raise the prices of imported goods, but the BoE also stated that they will consider all of this while making their next policy decision.
“This suggests inflationary pressures may be starting to feed through to the economy more quickly than anticipated, although the headline inflation rate is still some way below the Bank of England’s 2% objective for the time being”.
Britons hoping for a pay rise to compensate for increased costs are likely to be disappointed, according to analysts. The last time inflation was as high as 2% was December 2013.
“Companies may well look to clamp down on workers’ pay as they strive to save costs in a more hard environment”.
Advertisement
Workers lucky enough to see a rise in their salary thanks to a fall in low-skilled immigration are unlikely to enjoy a marked increase in living standards due to the general slowdown of the post-Brexit economy, a report published by the Resolution Foundation said Tuesday.
