Home Price Index rises, July CPI unchanged

Roman Schwartz
August 16, 2018

Earlier this month the Bank of England forecast inflation would rise to 2.6% in July before falling back.

"As the temporary factors pushing prices up fade away, inflation is expected to slowly fall back close to the target rate, but that will offer little respite for workers without a significant pickup to their salaries in tandem".

Based on the Consumer Price Index (CPI), retail inflation for June has also been revised downwards to 4.92 per cent from the earlier estimate of 5 per cent, as per the Central Statistics Office (CSO) data released today. The IMF had lowered its growth projection for India last month by 10bps to 7.3%, citing higher oil prices and speedier interest rate increases by the RBI because of higher-than-expected inflation.

However, the figures for June show that the price of new build properties shot up 9.6 per cent on an annual basis to £294,070, 3.8 per cent higher than in the previous month.

"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.

The food inflation came at 1.37 per cent, driven by cooling of pulses, vegetable and sugar rates.

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Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, said a pick-up in the cost of recreational goods and services to 3.1%, from 2.4% in June, mostly related to computer games, was another reason for the rise in average prices. "This is likely to weigh down consumer spending, posing fresh problems for embattled high street businesses", he added. The CPI has risen 0.9% since the start of 2018 and 1.4% over the past 12 months, still within the government's target range for annual inflation of between 1% and 3%.

According to the bureau, the figure is 0.09 per cent points less than the rate recorded in June. Years of steady house price hikes have created huge affordability issues for first-time buyers, so the fact that annual house price growth has fallen to its lowest point in five years will be a welcome change for many.

Prices for clothes were down by as much as 3.7pc month on month. However for eggs, cereals and products as also oil and fats the rate of price rise was higher than in June.

"The fall is instead explained by more non-sale price decreases and fewer price increases".

"If the recent depreciation of the INR sustains, it may modestly feed into the CPI inflation over the near term".

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