UK Inflation Rate Tops Forecasts

British inflation rate rose to 0.1 percent in July, beating market expectations and higher than 0 percent in June, driven by cost of housing and utilities and a rebound in clothing and footwear prices. Core inflation hit a five-month high.

Year-on-year, upward pressure came from cost of housing and utilities (up 0.4 percent, the same as in June) and restaurants and hotels (up 1.6 percent, from 1.9 percent in June). Prices of miscellaneous goods and services rose 0.7 percent (0.1 percent in June), clothing and footwear went up 1.7 percent (rebounding from a 0.8 percent drop in June), alcoholic beverages and tobacco increased 1.9 percent (2.3 percent in June) and communication cost rose 10 percent (the same since October last year).

In contrast, the highest downward pressure came from prices of transport (-1.9 percent from -1.8 percent in June), recreation and culture (-0.6 percent from -1 percent in June) and food and non-alcoholic beverages (-2.7 percent from -2.2 percent in June). 

On a monthly basis, consumer prices fell 0.2 percent in July after being flat in June. The largest downward contributions to the change came from food and non-alcoholic beverages: prices, overall, fell by 0.7 percent. The downward contribution came from price movements in most sectors – notably in the milk, cheese and eggs sector – where the prices of 2 pint cartons of shop bought milk have fallen. There was a partially offsetting contribution from rising prices in the bread and cereals sector. Cost of fuels and lubricants rose by 0.1p and diesel prices fell by 2.5p between June and July this year to stand at 116.5p and 118.7p per litre respectively. 

The core inflation rate which strips out increases in energy, food, alcohol and tobacco, accelerated to 1.2 percent from 0.8 percent in June, the highest since February. 

UK Inflation Rate Tops Forecasts

ONS | Joana Taborda |
8/18/2015 10:05:25 AM