Economy

Retail inflation in August shoots up by 3.36%, highest in five months

Retail inflation in August shoots up by 3.36%, highest in five months”

A shopper checks her shopping list in a supermarket in London, Britain April 11, 2017.

The cost of living in the United Kingdom jumped to a joint four-year high in August, official data from the Office for National Statistics, (ONS) showed Tuesday.

The August inflation number is the highest since March 2017, when it was recorded at 3.89 percent.

Wholesale prices are expected to rise 3 per cent in August from a year ago, from 1.88 per cent in July, according to the Reuters poll.

The main focus for investors will likely be on the UK's latest wage figures, with an expected rise in average earnings in July possibly strengthening Sterling, although some questions are likely to be raised over whether a rise in wages will also provide the BoE more wiggle room to leave rates on hold.

"Clothing prices rising faster than previous year, along with a hike in the cost of petrol, helped nudge inflation upwards".

The ONS added that airfares rose at a slower pace than a year earlier, which weighed on the price increase a little. Meanwhile, the cost of motor fuels and air fares had a "large upward effect", with petrol prices rising 1.8p per litre.

The chart below illustrates the sharp rise in inflation following last year's Brexit vote.

It attributed the increase to the fall in the value of the pound since the European Union referendum which has forced up prices for imported goods - costs which are evidently being passed on to shoppers at a time they can least afford them. Economists had forecast 3.34 percent inflation. "Productivity growth is sluggish, and technological changes look to be suppressing wages, with the likes of Uber, Amazon and Netflix disrupting traditional industries", he said. "All in all, I see more deflationary forces than inflationary in the world economy at present".

Likewise, prepared meals, snacks and candies as a category turned dearer with the rate of price rise at 1.96 per cent from 0.43 per cent in July.

Looking ahead the GBP/USD exchange rate may climb again on Wednesday as the United Kingdom publishes its latest employment data.



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