UK Inflation Rate at 20-Month High of 0.6%



Consumer prices in the UK increased 0.6% yoy in July, first month after the UK voted to leave the EU, following a 0.5% rise in June and beating market expectations of a 0.5% gain. It was the highest number since November of 2014 boosted by rise in the cost of transportation, alcohol and hotel and restaurant.

Year-on-year, the biggest upward pressure came from transport cost, with prices rising 0.2 percent, the first increase in 21 months; recreation and culture (+0.6 percent, +0.8 percent in June); restaurants and hotels (+2.7 percent, +2.3 in June); miscellaneous goods and services (+ 0.9 percent, +1.1 percent in June); alcoholic beverages and tobacco (+1.8 percent, +0.5 percent in June); health (+1.8 percent, +2.7 percent  in June); communication (+3.6 percent, +3.7 percent in June) and education (+4.8 percent, the same as in the previous nine months). 

In contrast, downward pressure came from housing and utilities (-0.1 percent, +0.1 percent in June); food and non-alcoholic beverages (-2.6 percent, -2.9 percent in June); clothing and footwear (-0.7 percent, the same as in June) and furniture, household equipment and maintenance (-0.8 percent, -0.5 percent in June).

On a monthly basis, consumer prices fell 0.1 percent, the first drop since January, following a 0.2 percent rise in June. Main downward contributions came from prices of housing, water, electricity, gas and other fuels (prices overall were unchanged). The downward effect came from housing rental, specifically Registered Social Landlord (RSL) rents, which saw a decrease. This may relate to the announcement in the Summer Budget 2015, which committed to reducing social housing rental prices by 1 percent per year for 4 years, starting in 2016. Recreation and culture: prices, overall, decreased by 0.1 percent, mainly due to games and toys, particularly computer games and consoles.

In contrast, upward contributions came from transport prices that overall rose by 1.6 percent, mainly motor fuels; alcoholic beverages and tobacco, mainly alcoholic beverages for which prices rose overall by 0.5 percent; restaurants and hotels: prices, overall, rose by 0.4 percent, mainly accommodation services, in particular overnight hotel stays. 

The core index which excludes prices of energy, food, alcohol and tobacco also fell 0.1 percent on the month and gained 1.3 percent on the year.

UK Inflation Rate at 20-Month High of 0.6%


ONS | Joana Taborda | joana.taborda@tradingeconomics.com
8/16/2016 11:59:46 AM