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UK Inflation Remains At 2.6%

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UK consumer prices rose at a steady pace in July and factory-gate inflation slowed to its lowest level so far this year, making it harder for the Bank of England Governor to advocate a rate hike amid weak economic growth.

Consumer prices climbed 2.6 percent annually in July, the same rate as seen in June, the Office for National Statistics said Tuesday. The annual growth was forecast to rise slightly to 2.7 percent.

Excluding energy, food, alcoholic beverages and tobacco, core inflation also remained stable, at 2.4 percent in July.

On a monthly basis, consumer prices fell 0.1 percent in July, while they were expected to remain flat.

In the latest Inflation Report, the central bank projected inflation to peak at about 3 percent in October. The bank sees inflation at 2.7 percent in the third quarter.

At the August meeting, the bank had signaled a tightening by a somewhat greater extent than markets project.

While today's data will continue to test the patience of some BoE hawks, ING Bank Economist James Smith expects the monetary policy committee as a whole to continue 'looking through' inflation spikes in favor of slower growth.

The ONS is slated to publish labor market statistics on August 16. Economists expect average earnings to grow 1.8 percent in the three months to June, well below the current inflation.

The consumer price index including owner occupiers' housing costs rose 2.6 percent annually in July, the same rate as in June.

Another report from the ONS on Tuesday showed that factory-gate inflation slowed for the third time this year, mainly as a result of 2016 price movements dropping out of the annual comparison.

Food production continued to be the main source of upward contributions to input and output price inflation.

Output prices grew 3.2 percent annually in July, weaker than the 3.3 percent increase in June. Nonetheless, the rate exceeded the expected 3.1 percent.

On the month, output prices gained 0.1 percent after staying flat in June.

Input price inflation eased more-than-expected to a 1-year low of 6.5 percent in July from 10 percent in June. Prices were forecast to climb 6.9 percent.

Month-on-month, input prices remained flat in July in contrast to a 0.3 percent fall in June. Economists had forecast a 0.4 percent rise.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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