UK Consumer Price Index (CPI) increased slightly from 0.0 percent to 0.1 percent in July. The CPI which measures change in the price of goods and services purchased by consumers-shows that prices increased by 10p on a £100 shop in the year to July 2015.
According to Office for National Statistics, the slight increase in the rate of inflation from 0.0 percent to 0.1 percent was mainly due to price movements in the clothing and footwear sector, with last year’s unusually steep price drop between June and July falling out of the inflation rate calculation. Prices in this sector follow a seasonal pattern.
This is because prices tend to be at their lowest over the winter and summer sales periods, rising in between. If the timing of the sales moves from its regular pattern, this can have a temporary impact on the rate of inflation. While this has happened a few times in recent years, the market has always moved back to its regular pattern.
Product Price Index (PPI) increased by 0.9 percent from previous month, beating analyst’s expectation. This shows surge in price of goods and raw materials purchased by manufacturers for last month, the surprise increase in weeks indicates possible renew orders. Core CPI also increased from 0.8 percent to 1.2 percent last month.
Although, the CPI increased by 0.1 percent it is still below Governor Mark Carney inflation target of 2 percent, it is believe that strength of pound is still hurting the economy and with time export is expected to pick up.
The pound rose by 0.4 percent to 1.5669 immediately after the report, economists interviewed by Bloomberg forecast that interest rate increase from the benchmark rate of 0.5 will happen in early 2016 when the inflation might have pose threat.
Markets across Asia continue to fall for second consecutive day. China stock fall the most in 3 weeks, erasing over 6.14 percent in capital today alone.