June 24, 2017

UK consumer inflation rises to 3 ½-year high of 2.7 percent

19 May 2017, 09:36 | Melvin Schneider

UK consumer inflation rises to 3 ½-year high of 2.7 percent

UK consumer inflation rises to 3 ½-year high of 2.7 percent

Also, at this juncture, growth dynamics do not point to the emergence of strong demand-pull inflationary pressures.

"It is now hard to see where a pay revival in Britain will come from", said Martin Beck, an economist with consultancy Oxford Economics.

The Consumer Price Index rallied to 2.7 per cent from a rate of 2.3 per cent in March, which had been also the highest level since September 2013.

That meant pay, adjusted for inflation, fell by 0.2 per cent in the first three months of the year, the first fall since the third quarter of 2014.

The Statistics Department said the increase was fuelled by price rises in food sub-groups comprising Oils and Fats (39.1 per cent), Fish and Seafood (6.2 per cent) and Meat (4.2 per cent).

Inflation hit a three-and-a-half-year high last month as the Brexit-hit pound and the timing of the Easter holidays pushed up the cost of living. Those data hint that while the inflation surge is fading, sustainable price growth, driven by improving domestic demand, is in the pipeline.

"It will be content to regard sterling-induced inflation as being a temporary phenomenon as long as our expectations of future inflation remain consistent with the 2 per cent target and wage growth does not rise unduly".

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One reason for analysts' gloominess over pay is Britain's stubbornly poor productivity. Output per hour declined 0.5 per cent compared with the fourth quarter, the biggest drop since the end of 2015.

On Tuesday, the Labour Party announced their aim of pledging a higher minimum wage and the potential involvement of the state in keeping prices in the energy sector down.

Mike Currie at Fidelity International said prices are likely to continue to outpace wage growth, tightening the squeeze on household budgets.

Unemployment fell to its lowest rate in more than four decades at 4.6 percent.

Economists taking part in the Reuters poll had expected the number of benefit claimants - which is considered to be a potential early warning sign of an economic downturn - to rise by 7,500.

The number in employment meanwhile surged by 122,000 to a record high of nearly 32 million people, the ONS added.

Today's figures show that the highest employment rate was in the South West with 78.7%, and that Northern Ireland had the lowest with 68.4%, while the highest unemployment rate was in London, and the lowest in the South East.

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