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London - UK inflation accelerated in July and there were signs of further price pressures with the weak pound leading to the biggest jump in import costs in more than four years.
Consumer-price growth picked up to 0.6% from 0.5% in June, the Office of National Statistics said in London on Tuesday. Economists had forecast that the rate would stay at 0.5%, according to the median estimate in a Bloomberg survey. Input costs surged an annual 4.3% last month, ending 32 consecutive declines, while import prices jumped the most since 2011.
After weeks of surveys, the inflation numbers mark the first hard numbers on the economy in the wake of the Brexit vote in June. While the full economic impact of the UK’s decision to leave the European Union will take time to be seen, data this week on the labour market, retail sales and the public finances will be scrutinized for clues.
“We expect inflation to pick up fairly rapidly over coming months,” said James Smith, an economist at ING Bank in London. “However, the lower outlook for growth means that the Bank of England will continue to ‘look through’ this and is likely to deliver a further rate cut later this year.”
ONS statistician Mike Prestwood said while there’s “no obvious impact” yet on headline inflation from the June 23 vote, producer-prices data “suggest the fall in the exchange rate is beginning to push up import prices faced by manufacturers.”
The pound has dropped about 13% against the dollar since the referendum. As a result, the BOE expects inflation to reach its 2% target faster than previously anticipated, though that didn’t stop it responding to Brexit threats with new stimulus this month. Sterling rose against the greenback after Tuesday’s data, climbing 0.7% to $1.2964 at 11:05.
Early upward pressure on prices was largely seen last month in import costs for materials such as metals, parts and chemicals, which rose an annual 6.5%.
Factory-gate prices rose 0.3% in July from June and were up 0.3% year-on-year, the ONS said. That’s the first annual increase in more than two years.
