UK INFLATION STICKS AT 2.2%
Newsflash: UK inflation remained unchanged last month, above the UK’s official target.
The Consumer Prices Index, which tracks cost changes across the economy, rose by 2.2% in the year to August, data just released by the Office for National Statistics shows.
That means prices are rising a little faster than the Bank of England’s target of 2%.
Key events
Services inflation rises, but goods prices keep falling
Services inflation accelerated to 5.6% in August, from 5.2% in July, the inflation report shows.
Conversely, goods prices continued to fall, and at a faster rate. The CPI goods annual rate fell from -0.6% to -0.9%.
Core inflation rises
Worryingly, underlying inflation across the UK has risen.
The Core CPI, which excludes energy, food, alcohol and tobacco, rose by 3.6% in the 12 months to August 2024, up from 3.3% in July.
Economists had expected a smaller rise in core inflation, to 3.5%.
Annual inflation rate for restaurants and hotels lowest since July 2021
Despite fears of a Taylor Swift effect, hotel and restaurant prices actually fell last month.
Today’s inflation report shows that prices at restaurants and hotels fell by 0.7% in August, compared with July.
This pulled the annual inflation rate for restaurants and hotels down to 4.4% in August 2024, down from 4.9% in the year to July, and the lowest rate since July 2021.
The ONS reports that the prices of various alcohol products at pub and restaurants rose by less than a year ago.
Some economists have suggested that strong demand from Swifties attending concerts this summer could have had an upward affect on inflation, as hotel owners reacted to higher demand by whacking up prices.
In August, Taylor Swift played five dates at Wembley Stadium.
Motor fuel prices fell last month
The cost of petrol and diesel fell last month, countering the impact of higher air fares and keeping inflation at 2.2%.
Today’s UK inflation report shows that motor fuel prices fell by 3.4% in the year to August, compared with a rise of 1.8% in the year to July.
According to the ONS, the average price of petrol fell by 2.1p per litre between July and August to 142.3p per litre. That’s down from 148.5p per litre in August 2023.
Diesel prices fell by 2.6p per litre in August to 147.8p per litre, down from 151.1p per litre in August 2023.
ONS: Rising air fares hit consumers
ONS chief economist Grant Fitzner says:
“Inflation held steady in August as various price fluctuations offset each other.
“The main movements came from air fares, in particular to European destinations, which showed a large monthly rise, following a fall this time last year.
“This was offset by lower prices at the pump as well as falling costs at restaurants and hotels. Also, the prices of shop bought alcohol fell slightly this month, but rose at the same time last year.
On a monthly basis, inflation rose by 0.3% in August 2024, the same rate as a year earlier.
The ONS says the largest upward contribution to the monthly change in inflation came from air fares, which rose this year but fell a year ago.
The largest offsetting downward contributions came from motor fuels, and restaurants and hotels, they add.
UK INFLATION STICKS AT 2.2%
Newsflash: UK inflation remained unchanged last month, above the UK’s official target.
The Consumer Prices Index, which tracks cost changes across the economy, rose by 2.2% in the year to August, data just released by the Office for National Statistics shows.
That means prices are rising a little faster than the Bank of England’s target of 2%.
Rise in chocolate prices could spook shoppers this Halloween
Sarah Butler
Shoppers may face a choccy horror show this Halloween after the price of chocolate shot up 11% in the past year – far outstripping increases for other foods across UK supermarkets.
Britons opening their doors to trick-or-treaters could decide to cut back on spending for 31 October, as the cost of chocolate rose sharply in the year to the end of August, way above wider grocery inflation of 2.7% over the same period, according to research by the consumer group Which?
The price has risen after cocoa prices more than doubled on world markets in the face of tree disease and adverse weather in growing countries aggravated by the climate crisis.
Tupperware Brands files for bankruptcy protection
While we wait for the UK inflation report… Tupperware, the manufacturer of food storage containers, has filed for bankruptcy protection.
Tupperware announced this morning it has voluntarily begun Chapter 11 proceedings in the United States Bankruptcy Court for the District of Delaware.
Laurie Ann Goldman, president and chief executive officer of Tupperware, blamed a “challenging macroeconomic environment” (costs of raw materials have jumped, and the pandemic boom in home cooking has faded, hurting sales).
Goldman added:
“Whether you are a dedicated member of our Tupperware team, sell, cook with, or simply love our Tupperware products, you are a part of our Tupperware family. We plan to continue serving our valued customers with the high-quality products they love and trust throughout this process.”
Economists at wealth management firm Investec predict UK inflation will dip to 2.1%, thanks to a drop in fuel prices.
But Sandra Horsfield, an economist at Investec, suggests hotel prices may have risen in August:
“Similarly, to the extent the jump and then fall in hotel price inflation in June and July this year was indeed linked to temporary extra demand for accommodation for the first UK leg of Taylor Swift’s Eras tour, the second leg of that tour falling into August could have boosted hotel and thereby services price inflation once more.”
Today’s UK inflation report may show a resurgence in price pressures across the key services sector.
PA Media reports:
The figures are set to reveal a marked jump in services inflation – covering prices in areas such as hotels, package holidays, hospitality and culture – with a possible impact of the last leg of Taylor Swift’s UK tour.
Economists are pencilling in a rise in services inflation to 5.6% in August, up from 5.2% in July.
Introduction: UK inflation and US interest rate decision today
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Inflation and interest rates are top of the agenda today.
Firstly, we’re about to learn how fast prices rose across the UK last month, when the latest official inflation report is released at 7am.
Economists predict the consumer prices index rose by 2.2% in the year to August, matching July’s figure.
That would mean prices were rising slightly faster than the Bank of England’s 2% target, but at a much slower pace than during the height of the cost of living crisis in autumn 2022, when inflation hit 11.1%.
A weak inflation reading might give the Bank of England confidence to cut interest rates on Thursday, while a higher rate would make policymakers lean towards maintaining borrowing costs.
As things stand, the money markets indicate there’s a 65% chance that the BoE leaves rates on hold tomorrow, and just a 35% chance of a cut.
Interest rates across the Atlantic will probably be cut later today – the question is by how much. Investors are split over whether the US Federal Reserve will start its easing programme modestly, with a cut of a quarter of one percent (25 basis points), or go big with a half-point reduction.
Currently, the markets think a bumper 50 basis-point cut is more likely. But we’ll see at at 7pm.
Kit Juckes, currency expert at French bank Société Générale, says:
Is the Fed a hare or a tortoise? Whether we get a 25bp or a 50bp cut from the Fed tomorrow matters less than the destination of rates. Reaching the right destination is more important than how fast you start. Just ask the hare!
The agenda
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7am BST: UK inflation report for August
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9.30am BST: UK house prices and rental costs data
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10am BST: Eurozone inflation report for August (final reading)
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7pm BST: Federal Reserve sets US interest rates
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7.30pm BST: Federal Reserve press conference
