The second major economic report, from the Commerce Department, said July housing starts increased 2.1 percent, showing that the housing recovery is still in good shape.
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But think-tank the National Institute of Economic and Social Research (NIESR) estimated that GDP fell by 0.2% month on month in July following the vote.
The wholesale inflation last witnessed at a higher level than the July 2016 was in August 2014, when it stood at 3.74%.
“There is no obvious impact on today’s consumer prices figures following the European Union referendum result, though the Producer Prices Index (PPI) suggests the fall in the exchange rate is beginning to push up import price faced by manufacturers”.
“The prospects for inflation excluding food and fuel are more uncertain; if the current softness in crude (oil) prices proves to be transient and as the output gap continues to close, inflation excluding food and fuel may likely trend upwards and counterbalance the benefit of the expected easing of food inflation”, RBI warned. All items, barring onion, in the basket showed a rising price pressure. “Inflation reached its highest rate for 20 months in July but is still short of the two per cent target”, he said.
The chamber warned that increase in WPI may result in increase in CPI which may affect the households and final consumers badly.
Howard Archer, chief European and United Kingdom economist at IHS Global Insight, said the 4.3% year-on-year jump in prices paid by United Kingdom manufacturers for materials and fuels provided “clear evidence that sterling’s weakness is feeding through to lift inflationary pressures further down the price chain”.
On an annual basis, inflation in the country added 0.8% during the reported month, compared to the 1.0% build seen previously.
The statement said the inflation for food articles in Primary Articles went up to 11.82 percent and for food products in Manufactured Products to 10.19 percent.
The ONS said the Retail Prices Index (RPI) – a separate measure of inflation, which includes housing costs – rose to 1.9% in July, up from 1.6% in June. However, we expect inflation to pick up fairly rapidly over coming months.
Its chief United Kingdom and European economist Howard Archer says a combination of increasing inflation and stalling wage growth will put pressure on consumer spending power.
Moving towards the new regime, the government last month notified 4 per cent inflation target for the next five years, based on which the MPC would take its monetary policy decisions going forward.
CPI readings are a key measure for the BOE in deciding appropriate monetary policy.
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Out of six members of MPC, three will be from RBI – the governor, who will be the ex-officio chairperson, a deputy governor and an executive director.
