Data Update: UK Inflation
Mixed messages for the UK macro economy were received once again yesterday. As the July inflation figures were released, it was clear that there wasn’t going to be one decisive narrative that would emerge as to whether the reading was supportive or destructive to the view that inflation is cooling in the UK. Having seen UK inflationary pressures begin to come under control, the BoE and many people and businesses alike were hoping to see that theme continue within yesterday’s data.
At the headline level, the data was encouraging: 6.8% aggregate inflation in July versus 7.9% in June. That brings the headline level of annual inflation to its lowest level since Q1 2022. Whilst an impressive fall, this figure wasn’t surprising given the 20% price fall in household energy prices in July. However, we know that the Bank of England and market are not just looking at headline inflation. Annual CPI inflation was known to fall due to changes in the price of consumer energy that we know took place during the data observation period. What has been more in focus has been the often-overlooked services component of inflation. As we have covered before, this measure often provides a truer reflection of domestic inflationary pressures.
Contrary to the headline level of inflation, the prices level in service rose by 0.2% to a figure of 7.4% in July versus the prior month. Rising services inflation will secure the BoE’s expected September rate hike with a further hike still likely predicated upon August inflation data due to be released in one months’ time. Especially when taken in conjunction with the strong wage inflation data earlier this week, the market will continue to speculate over the size, not the possibility, of the BoE’s September hike.
Discussion and Analysis by Charles Porter
Strong USD Those punitive tariff threats – Copper 50%, Brazil 50% and Pharmaceuticals 200% had a marked effect on USD. Bizarrely, while POTUS has been conducting his self-harming measures on the USA and the USD, he sees no contradiction in maintaining that he sees USD remaining the primary world reserve currency. A total of 22 […]
Australia Falling inflation, sluggish economic growth, a strong currency, lower living standards and low productivity would normally easily add up to an interest rate cut by the central bank: not in Australia where it was widely expected that yesterday would indeed see a rate cut. That is because the Reserve Bank of Australia is worried […]
Poland June 2025 will go down as a milestone for the energy sector in Poland as it was the first month that renewable energy overtook fossil fuels as a proportion of Poland’s total energy requirements. Poland is one of the highest emitting countries only behind China, Kuwait, South Africa, and Kazakhstan and despite coal consumption […]