LONDON (Reuters) – British inflation jumped unexpectedly to a six-month excessive in August, pushed up by bigger-than-usual seasonal will increase in sea and air fares and sending sterling above $1.32 for the primary time since late July.
Prices are displayed on a retailer window in London, Britain May 16, 2017. REUTERS/Neil Hall
Consumer value inflation rose at an annual fee of two.7 p.c in August, in contrast with 2.5 p.c in July, the Office for National Statistics stated – above all forecasts in a Reuters ballot of economists that had pointed to a fall to 2.four p.c.
The ONS additionally stated British home costs rose on the weakest annual fee in practically 5 years, dragged down by the most important drop in London home costs since 2009 – the newest signal of a slack housing market for the reason that 2016 Brexit vote.
Wednesday’s knowledge jolted buyers. British government bond costs and equities fell.
The figures are additionally prone to shock Bank of England officers who had anticipated inflation to chill to 2.four p.c in August.
The BoE final month raised rates of interest for the second time for the reason that monetary disaster however pointed to solely gradual future will increase because it expects inflation to float down to close its 2 p.c goal in three years’ time.
Jeremy Thomson-Cook, an economist with foreign money agency World First, stated the leap in inflation most likely mirrored a pick-up in spending by shoppers throughout Britain’s unusually sizzling summer season.
“I doubt this is sustainable in the longer term,” he stated, noting the persevering with squeeze on family spending. “I don’t think this has made Bank of England rate expectations any more concrete.”
The rise in inflation in August represents a setback to the modest restoration in real-terms wage progress that has helped to assist financial progress this yr.
The fall within the worth of the pound in August on renewed considerations about Brexit disadvantaged shoppers of the good thing about a fall in oil costs in annual phrases, the ONS figures confirmed.
“Consumers paid more for theatre shows, sea fares and new autumn clothing last month,” ONS statistician Mike Hardie stated.
Consumer value inflation hit a five-year excessive of three.1 p.c final November, when the inflationary impact of the pound’s tumble after Britain’s June 2016 referendum vote to exit the EU reached its peak.
The ONS stated home costs in July rose by an annual three.1 p.c throughout the United Kingdom as an entire in contrast with three.2 p.c in June – the smallest improve since August 2013.
House costs in London alone fell zero.7 p.c year-on-year in July, the most important drop since September 2009.
Despite August’s rise within the headline fee of inflation, the ONS knowledge instructed there could possibly be some reduction for shoppers within the months forward.
Prices at British manufacturing unit gates rose 2.9 p.c year-on-year in August, the weakest improve in 4 months. Manufacturers’ prices for supplies and vitality additionally rose on the slowest tempo in 4 months.
(For a graphic on ‘UK financial system interactive’ click on tmsnrt.rs/2byBv8u)