UK Inflation Rate Above Expectations


Consumer prices in the United Kingdom went up 0.5 percent year-on-year in June of 2016, accelerating from a 0.3 percent increase in the previous two months and higher than market expectations of a 0.4 percent gain. Cost of housing and utilities increased for the first time in three months and recreation and culture recorded the biggest gain since October of 2014.

Year-on-year, prices of housing and utilities edged up 0.1 percent after being flat in May; cost of recreation and culture rose 0.8 percent and restaurants and hotels increased 2.3 percent (2.6 percent in May). In contrast, transport prices declined 0.2 percent after falling at a faster 1 percent in May and food deflation deepened to 2.9 percent, the worst so far this year. 

On a monthly basis, consumer prices edged up 0.2 percent, the same as in May. Upward pressure came from: transport prices (up 1.1 percent), namely air fares, with the main contribution coming from European routes. The 10.9% rise in fares this year was the largest May to June movement on record although it is important to note that air fares are highly variable. Motor fuel prices also rose by more than a year ago, with petrol and diesel prices rising by 2.3 and 2.6 pence per litre respectively between May and June 2016. A smaller upward effect came from changes in sea transport fares, though this was offset by a downward pull from rail transport. Recreation and culture prices, overall, rose by 0.6 percent, principally games, toys and hobbies (particularly computer games. Other smaller upward effects came from cultural services and books. Communication, namely telephone equipment and services. In contrast, downward contribution came from furniture, household equipment and maintenance (prices fell by 0.3 percent), mainly furniture and furnishings, particularly kitchen units. 

UK Inflation Rate Above Expectations


ONS | Joana Taborda | joana.taborda@tradingeconomics.com
7/19/2016 9:56:40 AM