UK inflation accelerated for the first time in eight months in July largely on energy prices, while factory-gate inflation moderated, official data revealed Wednesday.
Consumer prices climbed 2.5 percent year-on-year in July, the Office for National Statistics reported Wednesday. Inflation had remained at 2.4 percent over the last three months.
Core inflation that excludes energy, food, alcoholic beverages and tobacco, held steady at 1.9 percent in July.
The fading impact of sterling’s post-Brexit fall is likely to keep a lid on core inflation over the coming months, adding another reason for the Bank of England to remain on hold this year as Brexit risks mount, James Smith, an economist at ING, said.
As much of the increase in inflation was due to higher energy prices, which is unlikely to be sustained, inflation should fall back gradually ahead, Andrew Wishart, an economist at Capital Economics, said.
Earlier this month, the Bank of England had lifted the rate by a quarter point as inflation remained above the 2 percent target.
ONS Head of Inflation Mike Hardie said, “Transport tickets and fuel, along with often erratic computer game prices, drove up costs for consumers.”
“On the other hand, there was a drop in prices for women’s clothing and footwear, and some financial services,” Hardie added.
On a monthly basis, overall consumer prices remained flat in July, in line with expectations.
Another report from ONS showed that output price inflation eased to 3.1 percent from 3.3 percent in the previous month. The rate came in line with forecast. The annual rate has remained positive since July 2016.
Month-on-month, output prices remained unchanged, while economists had forecast a 0.2 percent rise after 0.3 percent increase posted in June.
At the same time, input price inflation came in at 10.9 percent versus 10.3 percent in June and the forecast of 10.4 percent. Monthly inflation accelerated to 0.5 percent from 0.3 percent, while it was forecast to slow to 0.1 percent.
ONS data showed that house price inflation was the lowest in nearly five years as London witnessed its worst decline in house prices since 2009.
House prices rose 3 percent year-on-year after a 3.5 percent gain in May. The latest increase was the smallest since August 2013, when prices grew 3 percent.