INFLATION rose to a higher-than-expected 0.6 per cent last month as the increasing cost of motor fuels and second-hand cars drove up transport prices.
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United Kingdom inflation increased slightly in July to the highest since November 2014, data from the Office for National Statistics showed Tuesday.
US consumer prices were unchanged in July as a big drop in gasoline and other energy prices kept inflation under control.
The year-on-year comparison of the CPI for July with the CPI for July, 2015 show that the general index increased by 2.8 percent primarily due to increase in the cost of education, recreation and the prices of fuel, utilities and some other goods and services.
“Although the small increase in the rate between June 2016 and July 2016 takes it to the highest seen since November 2014, it is still relatively low in the historic context”, the office said in the statement.
The rise in producer “input prices” is the first since September 2013.
Inflation rose to 0.6% in July in the first signs of the impact of the pound’s heavy fall following the “Brexit” vote on prices.
The final WPI for “All Commodities” (Base: 2004-05=100) for May 2016 stood at 180.2 as compared to 179.4 provisionally reported on June 14.
Economists say a moderate increase in prices is important for overall growth, helping push up wages and make it more cost-effective to borrow money.
Construction on new houses was beginning at a rate of 1.21 million units a year in July, which was more than expected. The government has recently notified the new inflation target of 4% – plus/minus 2% – for the next five years and rising price pressure will test the new RBI governor who will replace Raghuram Rajan. Using the chart below, the data institute highlighted that inflation tends to climb when sterling slumps against major trading partners, such as the USA and the eurozone, as imported products get more expensive for British buyers.
Shelter costs, which account for about one-third of CPI, rose 0.2% in July, a slower increase than in the prior two months.
For the three months to July, NIESR said the economy eked out growth of 0.3 per cent in a “marked economic slowdown” on the second quarter, when GDP increased by 0.6 per cent.
“Rising inflation is going to provide a headache for the Bank of England”, FXTM’s Ahmad said.
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The pound has dropped about 13 per cent against the dollar since the referendum.
