UK inflation stays at 2 per cent in June

Rents and utility bills rose, while clothing prices fell over past year; London house prices plunged at fastest rate since August 2009 

Olesya Dmitracova
Economics and Business Editor
Wednesday 17 July 2019 13:57 BST
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Despite Morrisons recently announcing it will sell 20p paper carrier bags in all stores to reduce plastic waste, the supermarket was said to be the worst offender among those assessed
Despite Morrisons recently announcing it will sell 20p paper carrier bags in all stores to reduce plastic waste, the supermarket was said to be the worst offender among those assessed

Consumer prices in the UK rose 2 per cent in June compared with a year ago, the same rate of inflation as in May and in line with the Bank of England’s target.

Data from the Office for National Statistics (ONS) showed that housing costs such as rents and utility bills increased over the past year. The Consumer Price Inflation measure targeted by the central bank does not include the costs of owning and maintaining a home nor council tax.

Clothing and footwear prices were among the very few components of the CPI that fell last month and at a much slower pace than in May.

The steady course of inflation looks unlikely to last. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said in a comment on Twitter that a weaker pound and a recent pick-up in wage growth point to higher inflation ahead.

The pound fell to its lowest level against the dollar in more than two years on Tuesday after the two contenders to be Britain’s next prime minister promised to scrap the Irish backstop, amplifying fears of a no-deal Brexit.

Meanwhile, official data showed that growth in UK wages accelerated in the three months to May compared with a year earlier.

But a disorderly Brexit risks giving a much bigger boost to inflation, as Suren Thiru, head of economics at the British Chambers of Commerce, explained.

“Such an outcome would probably trigger a significant decline in the value of sterling, pushing inflation materially higher and increasing the financial squeeze on businesses and households,” he said.

The Brexit vote has already contributed to a bigger fall in living standards than the recession of the early 1990s, research by the Resolution Foundation has found.

Separate official figures also published on Wednesday showed that UK house prices climbed by 1.2 per cent in the year to May compared with a 1.5 per cent rise in the year to April. The ONS noted a general slowdown in house price growth over the past three years.

London was the worst performer in the latest period, with house prices plunging by 4.4 per cent – the biggest fall since August 2009.

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