By Esmée Hardwick-Slack
UK inflation rate unexpectedly rose to 2.7% in August 2018.
The rise is due to the increasing prices for recreational goods, transport and clothing. Wages, however, are still rising more than inflation, growing by 2.9% (excluding bonuses) earlier this year.
Alastair Neame, senior economist at the Centre for Economics and Business Research, said:
“Today’s inflation data show that the rate of price growth accelerated in August, and may well prove to have exceeded total earnings growth in the dame period. Unless UK workers can increase their productivity, this trend is likely to continue – squeezing living standards over the term”.
The Bank of England has expressed concern that inflation remains above the 2% target set by the government, fuelling its decision to raise interest rates last month above the emergency level introduced after the financial crisis for the first time.
Ben Brettel, Senior Economist at Hargreaves Lansdown has said: “The figures won’t come as welcome news to the Bank of England, though – they’ll be desperate to leave policy unchanged until we get some clarity over Brexit and won’t want to be forced into a rate rise by accelerating prices”.
The Office of National Statistics (ONS) said transport costs have increased due to rises in sea and air fare. Petrol prices have also risen by 1.4 pence between July and August. Clothing launched by high street shops for the autumn season also impacted inflation. The average price of clothing and footwear rose 3.1% between July and August, with women’s and children’s items increasing the most.
However, Chief Economic Advisor to the EY Item Club, Howard Archer has said the rise in inflation is temporary due to it being fuelled by large increases from relatively few items: “We would expect this to unwind in next month’s release”.
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Wages Rise Faster Than Expected