UK: Inflation leaps to multi-month tops in July – UOB

Lee Sue Ann, Economist at UOB Group, gives her assessment on the July’s inflation figures in the UK.

Key Quotes

“Inflation in the UK jumped unexpectedly in July to its highest rate since March, in a blow to households already struggling from the COVID-19 pandemic. CPI rose to 1.0% y/y from 0.6% y/y in June, above expectations for an unchanged rate of 0.6% y/y. The latest CPI figure was pushed up by clothing prices and household items, as the COVID-19 pandemic meant stores reduced the number of discounted items from last year.”

“Core inflation, which excludes volatile energy, food, alcohol and tobacco prices, also rose to 1.8% y/y from 1.4% y/y in June, and against expectations for a reading of 1.2% y/y. Month-on-month, consumer prices rose 0.4% m/m in July, accelerating from a rise of 0.1% m/m in June.”

“Even though this is still well below the Bank of England (BOE)’s target of 2%, the climb in inflation certainly cofounds the expectations of the central bank. That said, the rise is expected to be short-lived. The BOE is expecting inflation to turn briefly negative in the near term (falling to -0.3% m/m in August) due to lower energy prices and the impact of government measures to support businesses.”