Introduction: UK inflation report in focus
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The UK may get some respite in the cost of living squeeze today, but inflationary pressures are not over.
The latest inflation report, due at 7am, is expected to show that prices rose at a slower rate in July, partly because households benefited from the drop in the energy price cap last month,
Economists predict the annual rate of inflation slowed in July, to around 6.8%, down from June’s 7.9%. That would be the lowest rate of price rises since spring 2022.
Yesterday we learned that basic pay is rising at the fastest rate in at least two decades, with regular wages rising by 7.8% in the April-June quarter. So today could bring a welcome return of rising real wages.
That would be a relief for workers, but could also encourage the Bank of England to raise interest rates.
And it’s important to remember that falling inflation does not mean prices are falling – simply that they are rising less sharply, compared to a year ago.
Henk Potts, market strategist at Barclays Private Bank, sets the scene…
“We expect the UK July inflation print to show a further moderation in price pressures. We anticipate headline consumer price index (CPI) to ease to 6.7% year on year, compared to the 7.9% increase registered in June. In our view the deceleration should primarily be driven by an easing of energy prices and reflect the decrease in the Ofgem price cap.
“We would also expect food, alcohol and tobacco price rises to continue to slow due to lower producer prices. We expect less progress to be made in services, where pricing is strong and wage growth continues to be robust.
“Despite the improvement in price pressures, the Bank of England is not yet in a position to declare a cessation of hostilities with its battle with inflation. We estimate that UK inflation will remain above the 2% target through 2024 and therefore expect a further quarter-point rate increase at the Monetary Policy Committee’s September meeting.”
The agenda
-
7am BST: UK inflation report for July
-
9.30am BST: UK house prices and rents data
-
10am BST: Eurozone GDP report for Q2 2023
-
11am BST: Ireland’s residential property prices data
-
1.30pm BST: US housing starts data
-
7pm BST: US Federal Reserve releases minutes of its last meeting
Key events
UK INFLATION REPORT RELEASED
Newsflash: The UK’s inflation rate has fallen to its lowest level since spring 2022.
The Consumer Prices Index rose by 6.8% in the year to July, the Office for National Statistics reports, down from 7.9% in June, and meeting City expectations.
That takes CPI inflation further from the peak of 11.1% set last October.
But it still leaves inflation well over the Bank of England’s target of 2%.
More to follow…
Today’s inflation report will be watched just as closely in Westminster as in the City of London.
Yesterday, Rishi Sunak – who has pledged to halve inflation by the end of this year – insisted that conditions are improving:
“We are making progress, the last set of numbers we had showed that inflation was falling faster than people expected.
“The plan is working. I think there is light at the end of the tunnel.
“If we get through this, people will really start to see the benefit in their bank accounts, in their pockets, as inflation starts to fall.”
But Labour got their prebuttal in early, pointing out that households have suffered badly in the cost of living squeeze.
The opposition accused Sunak of overseeing a £350 increase in monthly bills for the average household since 2021/22.
Shadow economic secretary Tulip Siddiq said:
“Families in Britain are worse off because of 13 years of economic chaos and incompetence under the Conservatives.
“We’ve had a decade of low growth, low pay and high taxes. Now families are paying the price of the Conservatives’ cost-of-living crisis with higher bills and prices in the shops.
“If Labour were in power today, we would introduce a proper windfall tax on the huge profits the oil and gas giants are making to help families with the cost of living.
“Labour’s plan to build a strong economy will boost growth, increase wages and bring down bills so working people are better off.”
Introduction: UK inflation report in focus
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The UK may get some respite in the cost of living squeeze today, but inflationary pressures are not over.
The latest inflation report, due at 7am, is expected to show that prices rose at a slower rate in July, partly because households benefited from the drop in the energy price cap last month,
Economists predict the annual rate of inflation slowed in July, to around 6.8%, down from June’s 7.9%. That would be the lowest rate of price rises since spring 2022.
Yesterday we learned that basic pay is rising at the fastest rate in at least two decades, with regular wages rising by 7.8% in the April-June quarter. So today could bring a welcome return of rising real wages.
That would be a relief for workers, but could also encourage the Bank of England to raise interest rates.
And it’s important to remember that falling inflation does not mean prices are falling – simply that they are rising less sharply, compared to a year ago.
Henk Potts, market strategist at Barclays Private Bank, sets the scene…
“We expect the UK July inflation print to show a further moderation in price pressures. We anticipate headline consumer price index (CPI) to ease to 6.7% year on year, compared to the 7.9% increase registered in June. In our view the deceleration should primarily be driven by an easing of energy prices and reflect the decrease in the Ofgem price cap.
“We would also expect food, alcohol and tobacco price rises to continue to slow due to lower producer prices. We expect less progress to be made in services, where pricing is strong and wage growth continues to be robust.
“Despite the improvement in price pressures, the Bank of England is not yet in a position to declare a cessation of hostilities with its battle with inflation. We estimate that UK inflation will remain above the 2% target through 2024 and therefore expect a further quarter-point rate increase at the Monetary Policy Committee’s September meeting.”
The agenda
-
7am BST: UK inflation report for July
-
9.30am BST: UK house prices and rents data
-
10am BST: Eurozone GDP report for Q2 2023
-
11am BST: Ireland’s residential property prices data
-
1.30pm BST: US housing starts data
-
7pm BST: US Federal Reserve releases minutes of its last meeting
