MercoPress. South Atlantic News Agency

UK inflation in July climbed to 2.5%: a blip or a trend?

Inflation in UK had been subdued for several years prior to the vote to leave EU in June 2016. But the vote caused a fall in the value of the pound, pushing inflation.

UK inflation climbed in July as had been expected, according to the latest data from the Office of National Statistics, ONS, released on Wednesday. ONS reported that the rate of consumer price inflation, the most-watched measure, increased from 2.4% in June to 2.5% in July, reversing a trend of gradually declining inflation over the course of 2018.

 CPIH, the ONS' preferred method of measuring inflation was at 2.3% in July, unchanged from the previous month.

“Transport tickets and fuel, along with often erratic computer game prices, drove up costs for consumers,” the ONS' head of inflation, Mike Hardie, said in a statement alongside the data release. “On the other hand, there was a drop in prices for women's clothing and footwear, and some financial services,” he added.

Inflation in the UK had been subdued for several years prior to the vote to leave the EU in June 2016. But the vote caused a fall in the value of the pound, which pushed up inflation. As the pound has recovered, inflation once again started to fall, dropping from 3% at the end of 2017 to 2.4% last month.

It has now risen again, although the ONS suggested this is likely a blip, noting that computer game prices — which helped drive inflation higher — are “highly variable from month to month.”

The latest inflation figures come just 24 hours after the ONS showed that unemployment in the UK has fallen to just 4%, a low not witnessed since the early 1970s. Tuesday's data also showed that real wages in the UK continue to grow, although not by much, something that will be made worse by Wednesday's higher inflation reading.

“These figures show that the cost of living squeeze is not yet a thing of the past,” Tej Parikh, a senior economist at business lobbyist the Institute of Directors said in an email. “For households, this isn't good news, as the already weak growth in their pay packets is being further eroded by high prices. This is likely to weigh down consumer spending, posing fresh problems for embattled high street businesses,” he added.