July’s consumer price increases were driven in large part by a steep rise in the cost of housing, which is now up more than 3 percent over the past year, in the biggest yearly gain since January of 2008. Core prices were up 1.8% from a year earlier. It was the sixth straight month of increase in the CPI.
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Inflation will remain in the doldrums for the rest of 2015 and pick-up at the start of next year will only be slight, a leading economist has predicted.
“The inflation picture is pretty soft”, David Sloan, a senior economist at 4Cast Inc.in New York, said before the report. That was on top of a 0.3 percent again in June. The second longest was between 1999 and 2000 when prices fell for 12 months in a row. They just need to a have reasonable confidence it will return to mandate. With the Bank of England drumbeat for a raise in interest rates getting steadily louder, we’re already starting to see some of the cheapest mortgage deals disappearing from the market, ‘ he explained.
Food and non-alcoholic beverages that increased included hot beverages (0.9%), bread and cereals (0.5%), vegetables (0.4%), fish (0.3%), oils and fats (0.2%) and cold beverages (0.2%), while decreases included fruit (-2.5%), meat (-0.4%) and sugar, candies and desserts (-0.3%). The dollar was trading slightly higher against a basket of currencies.
The core measure rose to 1.2 per cent from 0.8 per cent in June – the highest it has been in five months.
Peter Rollings, chief executive officer of Marsh & Parsons, pointed out that price rises in London continue to be overpowered by the East and South East for the moment.
Education has a weight of 5.75 percent in Consumer Price Index (CPI) basket.
Housing charity Shelter said the average house price for first-time buyers was now £12,000 more than this time last year and called on the Government to build more affordable homes.
Prices for second-hand homes rose six per cent year-on-year in June to £321,000.
Declining homeownership and a rental vacancy rate near a 22-year low is driving rents higher. About 60 percent of the index covers prices consumers pay for services from medical visits to airline fares, movie tickets and rents. Excluding food and fuel, costs also rose less than projected.
The Fed’s preferred inflation gauge, the price index for personal consumption expenditures, has undershot the target for three years.
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Dean Popplewell has almost two decades of experience trading currencies and fixed income instruments.
