UK inflation misses forecasts but remains stable in August, import prices rise sharply

14 September 2016, 15:34
Eko Rediantoro
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Official figures released earlier on Tuesday showed that UK inflation in August was stable at 0.6 percent on the year, unchanged from July. Economists had predicted a rise to 0.7 percent, while the Bank of England forecast the headline rate would climb to 0.8 percent. Month-over-month, consumer price inflation accelerated 0.3 percent, compared to estimates for a gain of 0.4 percent and following a decline of 0.1 percent in July.

Data confounded separate reports on producer price data showing manufacturers’ costs climbed at the fastest annual rate in almost five years. There was little evidence that the dramatic drop in the pound following the Brexit vote was feeding through to consumer prices, noted ONS statistician Mike Prestwood.

Core CPI, which excludes food, energy, alcohol, and tobacco costs rose at a seasonally adjusted rate of 1.3 percent last month, unchanged from July and compared to forecasts for a reading of 1.4 percent. The data also showed that the house price index rose 8.3 percent, slowing from an increase of 9.7 percent in July.

The Retail Prices Index (RPI) measure of inflation dropped to 1.8 percent in August from 1.9 percent in July. Imported raw materials are becoming pricier largely due to the tumble in the pound following the Brexit vote. Input costs rose 7.6 percent in August, which represents the biggest rise since December 2011. However, factory gate prices rose by just 0.8 percent. While this was the biggest increase in more than two years, it was below forecasts of 1 percent.

"While signs of the coming inflation pickup are admittedly mixed in today’s data, we still envisage an overshoot of the 2% target for CPI from 2017 Q2. This reflects the upward push from weaker sterling as well as the mere absence of sharp oil price falls as in 2015." said Lloyds bank in a report.


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