Inflation eased on a monthly decline in petrol and diesel prices, while food and clothing became more expensive. Economists had expected a further small rise to 10.2% in the nominal interest rate. Prices rose 0.5% in August from July, according to the Office for National Statistics. He said: Food and non-alcoholic beverages had the largest upward contribution to monthly rates in August 2022, while falling motor fuel prices resulted in a large offsetting downward contribution. Updated at 07.44 BST Important events BETA filters Key Facts (4) United Kingdom (5) Bank of England (3) However, inflation concerns remain. Core inflation (which strips out energy, food, alcohol and tobacco) rose 6.3% last month from 6.2% in July, rather than falling like the headline rate. Paul Dales, UK chief economist at Capital Economics, said: The easing of CPI inflation from 10.1% in July to 9.9% in August is somewhat of a relief after yesterday’s US CPI shock, but UK headline and core CPI inflation have yet to peak. Therefore, the Bank of England will have to keep turning the screws. …We are more concerned about the continued upward momentum in services inflation, which increased from 5.7% to 5.9%. That’s why core CPI inflation remained at a 30-year high of 6.3%. Services inflation is driven by a tight labor market and strong wage growth, which has shown little sign of abating yet. Overall, we believe that CPI inflation will peak around 11.0% shortly before the end of the year and that core inflation will also continue to be higher. This means the Bank will have to keep raising interest rates, from 1.75% now to 3.00% if not higher.
Falling UK inflation eases pressure on the Bank of England
An unexpected slowdown in UK inflation eases pressure on the Bank of England and means it does not need to “strangle the economy” by raising interest rates as high as 4% as markets have been predicting, an economist says. “In one line: Maintaining, rather than increasing, pressure on the monetary policy committee (MPC) to act,” says Samuel Tombs, chief UK economist at Pantheon Macroeconomics. The headline rate of CPI inflation fell in August for the first time since last September and now looks set to fall sharply next year, thanks in part to the government’s cap on energy prices. A sharp decline in motor fuel CPI inflation to 32.1% in August from 43.7% in July was the main driver of the nominal rate drop. This dominated the further increase in food CPI inflation to 13.1%, from 12.6%, linked to earlier sharp increases in producer and import prices. Looking ahead, we believe headline CPI inflation will rise to nearly 11% in October, driven by a 1.0 p.m. to the contribution of electricity and natural gas prices. The latter will rise by just 27% month-on-month in October, well short of the 80% increase Ofgem announced last month, following the new prime minister’s intervention last week. However, we are increasingly confident that the October CPI inflation rate will prove to be the peak and that it will decline rapidly in 2023, perhaps even by the end of the year to the 2% target. Admittedly, some service prices — such as rents for social housing tenants and mobile phone contract prices — rise each year relative to last year’s nominal rate of CPI inflation. This relatively benign medium-term outlook for CPI inflation should convince the MPC that it does not need to strangle the economy by raising Bank Rate up to 4%, as markets are currently predicting. The Bank of England building. Photo: Maja Smiejkowska/Reuters Updated 08.02 BST Here’s our full story on inflation: Larry Elliott and Richard Partington in our economics team also looked at what the Queen’s death and funeral next week means for the economy. Britain’s fragile economy was already teetering on the brink of recession even before Queen Elizabeth II’s death last week. That prospect is now much greater as businesses cancel events amid a period of national mourning that culminates in the bank holiday for the late monarch’s funeral. Economists say shops closing their doors or opening reduced hours on Monday, alongside the loss of an entire working day, will lead to a sharp fall in output at a time when Britain is struggling for growth amid a cost of living crisis. Updated at 07.42 BST September’s CPI (from mid-October) is important as it will be used by the government as a basis for increases in benefits and pensions next April. Fall in annual inflation. August data from @ONS: CPI 9.9%, from 10.1%. RPI 12.3%, unchanged from July CPIH nobody uses (except Ofwat) 8.6%, down from 8.8% Next month’s CPI is what is used to increase benefits and pensions in April — Paul Lewis (@paullewismoney) September 14, 2022 Updated at 07.36 BST “Miscellaneous goods and services” such as hairdressing, hygiene and cosmetics, jewellery, insurance and financial services registered a rate of 4.6%, up from 4% in July and the highest since September 2005. The biggest price increases came from appliances and personal care products. Clothing and footwear prices rose 7.6% in the year to August, up from 6.6% in July. Prices usually rise at this time of year as autumn ranges hit the stores after the summer sale season, although the Covid pandemic has affected the usual pattern over the past couple of years. The increase was mainly driven by men’s and women’s clothing, where prices rose between July and August but fell between the same months a year ago. UK #CPI inflation eased slightly to 9.9% in August from 10.1%, helped by lower petrol prices, but still painfully high. #Food and non-alcoholic drinks up 13 .1%, from 12.7% in July. Core inflation (excluding food and energy) also rose. So not as bad as we feared, but still bad. — Julian Jessop (@julianHjessop) September 14, 2022
Food prices are rising at the fastest rate since 2008
Bringing some relief to motorists, the annual rate for motor fuel fell from 43.7% to 32.1% between July and August. This is mainly due to petrol prices falling by 14.3p per liter between these months, compared to a rise of 2p a year ago. Diesel prices have also contributed to the change in pace, falling by 11.3p per liter this year. However, prices of food and non-alcoholic beverages rose at an annual rate of 13.1% in August, up from 12.7% in July, the highest rate since August 2008. The biggest uptick came from milk, cheese and eggs. UK inflation including housing costs Photo: ONS Updated at 07.24 BST
UK inflation eases to 9.9% but remains close to 40-year high – Business Life
Inflation in the UK eased slightly in August, easing to an annual rate of 9.9% from 10.1% in July, easing some pressure on households – but remaining close to a 40-year high. Inflation eased on a monthly decline in petrol and diesel prices, while food and clothing became more expensive. Economists had expected a further small rise to 10.2% in the nominal interest rate. Prices rose 0.5% in August from July, according to the Office for National Statistics. He said: Food and non-alcoholic beverages had the largest upward contribution to monthly rates in August 2022, while falling motor fuel prices resulted in a large offsetting downward contribution. Updated at 07.44 BST
Introduction: UK inflation forecast to remain in double digits
Good morning and welcome to our rolling coverage of business, the global economy and financial markets. It’s inflation day in the UK. Inflation is forecast to rise to 10.2% in August from 10.1% in July, hitting a new 40-year high, as energy and food prices have soared in recent months. The key rate, which excludes volatile items such as energy and food, is expected to have risen to 6.3% from 6.2%. The National Statistics Office is due to release the data at 7am. BST. It would be only the fifth time in 70 years that inflation exceeded the 10% mark, the other times being 1951-52, 1973-77 and 1979-82. The Bank of England has predicted that inflation will rise above 13% in the coming months and trigger a long recession as families and businesses cut back on spending. Michael Hewson, chief market analyst at CMC Markets UK, says: Last week’s decision by the UK government to freeze energy bills at the level of the April price cap should limit worst forecasts for headline CPI [consumer prices index]however it will not change the fact that inflation is likely to remain persistent for longer. Stock markets in Europe, the US and Asia plunged after US inflation remained persistently high in August at 8.3% yesterday, down slightly from 8.5% in July and 9.1% in June, the highest of the last four decades. Despite the falling nominal interest rate, details of the report from the Bureau of Labor Statistics showed prices rising across a wide range of goods and services and triggered sharp falls on Wall Street, the worst since June 2020. In Europe, the FTSE 100 closed 1.17% lower while the German Dax fell 1.6%. In Asia, Japan’s Nikkei and Hong Kong’s Hang Seng both lost 2.7% overnight, while the Australian market fell 2.4%. This means that the US market now expects the Federal Reserve to make another 75 basis point rate hike next week, and there is even a possibility of a 100 basis point increase. Hewson says: It’s certainly not a number Fed officials will be happy with, and it will only serve to reinforce Powell’s message that the Fed will continue to raise interest rates until there is clear evidence that inflation is on a sustainable downward path. A 100bps traffic would send completely…
