Economists surveyed by The Wall Street Journal had expected overall prices to be unchanged and core prices to increase 0.2%. Output prices advanced 0.3 percent on a yearly basis, reversing a 0.2 percent fall in June.
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Consumer prices, meanwhile, rose by an annual 0.6% in July, taking the index to the highest level since November 2014. Because of that, the Bank of England expects inflation to reach its 2 per cent target faster than previously anticipated, though that didn’t stop it responding to Brexit’s economic threats with new stimulus this month.
This suggests that the record fall in sterling in the wake of the 23 June referendum vote is beginning to push up the import costs of domestic manufacturers, which should, eventually, feed through into higher consumer prices.
The main drivers of the Julyincrease in inflation were rising fuel and alcohol prices, and higher restaurant and hotel bills.
“These are the first sets of consumer and producer prices data collected since the referendum polling day”.
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. This was the first annual increase in almost three years, driven upward by a 6.5% jump in import prices, which rose by the most since 2011.
The 12-month consumer price index (CPI) rose 0.6% in July, the Office for National Statistics said in a statement. Headline prices didn’t make any progress in July as energy costs fell.
Tuesday’s inflation numbers suggest that inflation will surpass 3% by mid-2017, according to Samuel Tombs, the chief United Kingdom economist at Pantheon Macroeconomics.
Late on Monday, financial markets were placing a 46.7 per cent probability of a rate increase at the Fed’s December policy meeting, according to CME Group’s FedWatch tool. “Combined with stagnant pay growth, we expect real (inflation-adjusted) employee earnings to decline by 0.1 per cent in 2017, after rising by 2.4 per cent in 2015 and 1.5 per cent this year. Accordingly, we think that CPI inflation should break through the 2% target in early 2017 and near 3% by the end of that year”.
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“Given that oil and commodity prices are largely quoted in USA dollars, this is likely to have a particularly marked upward impact on inflation”. “The hope for United Kingdom households will be that the supermarkets’ battle to keep customers and protect market share will mean that they will be willing to swallow any future cost increases coming from rising post-Brexit import costs”.
