Surprise Steadiness In UK Inflation – Weighed Down By Summer Sale

The fall of clothing prices in the United Kingdom resulted in the rate of inflation remaining at 2.4% for the third month in a row in June, shows data from the Office for National Statistics.

It has been expected last month that the Consumer Price Index (CPI) measure of inflation to rise to 2.6.%. However, inflation was weighed down by the summer sales following price cuts on clothing – especially those of men’s fashion.

The steadiness of inflation means that despite the slowing down of pay growth in the UK at about 2.7%, it still remains over the rate of inflation.

After the surprise reading, there was a fall in the pound fell against the dollar with a slippage of 0.60% to $1.3037.

Markets had been expecting an increase of interest rates by the Bank of England sometime in August this year.

However, with the figure from June, one can say that rate hike is not “a done deal”, said Ben Brettell, Senior Economist, Hargreaves Lansdown.

He said: “Markets had been pricing in around an 80% chance the Bank would lift borrowing costs in August, but today’s inflation data combined with yesterday’s lacklustre wage growth figures could force policymakers into a rethink.”

Neil Wilson, chief market analyst at Markets.com, said: “The Bank of England’s policymakers seem to be guiding a hike and the market has quietly acquiesced but data this week does not support the case for an imminent raising of rates.

“My bet is the Bank will – as in May – be forced by softer data to be forced away from raising rates too quickly.”

There had been a fall of 2.3% between May and June this year in the price of clothing and footwear while there was a drop of 1.1% in the same commodities in the same period last year, the ONS said.

While clarifying that the drop in prices because of the Sumer sale is a common phenomenon at this time of the year, the ONS said that the fall this year however was the biggest since 2012 and “the effect came mainly from men’s clothing”.

There was also a fall in the price of computer games. The ONS said: “Prices for these games are heavily dependent on the composition of bestseller charts, often resulting in large overall price changes from month to month.”

At the same time however, inflation was kept steady by increase in prices of motor fuel and household energy costs.

Rising the highest in average prices since September of 2014, between May and June 2018, petrol prices rose by 2.7p per litre to 128p. Diesel prices also rose, up 2.9p to 132.1p. Last year in the same period, there was a fall of bin the prices of both petrol and diesel.

Mike Hardie, head of inflation at the ONS, said: “Consumers have been feeling the benefit of the summer clothing sales, and computer game prices have also fallen.

“However, gas and electricity and petrol prices all rose, with consumers seeing the highest price at the pump for nearly four years, with inflation remaining steady overall.”

(Adapted from BBC.com)

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Categories: Economy & Finance, Geopolitics, Strategy, Sustainability, Uncategorized

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