UK inflation beats expectations with 0.1% July rise

Core inflation rises to highest level in five months

Natalie Kenway
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The UK's Consumer Prices Index (CPI) grew by 0.1% in the year to July, surpassing expectations it would remain at zero, as a shift in the timing of summer sales boosted prices for the period.

The Office for National Statistics said the largest upward contribution "by far" to the change in the 12-month rate was clothing and footwear, which fell by 3.4% between June and July, a much lower fall than the 5.7% seen between the same two months last year.

Many economists expected strong sterling and the slump in the oil price to hold inflation at zero, a figure it fell to in June after first touching zero in February and briefly entering deflationary territory in May.

Core inflation, the measure of price growth, also rose to a higher level than analyst predicted. It increased to 1.2% in July from 0.8%, its highest point for five months.

Other boosts to the CPI figure were transport costs, in particular air fares, although food and non-alcoholic beverages partially offset the rise, falling on an annual basis for a 13th month in a row.

While the headline figure was above expectations, it is still well below the 2% Bank of England target.

Governor Mark Carney recently said he expects inflation to remain low for longer than previously anticipated, but that it should pick up towards the end of the year, paving the way for interest rate rises.

 

 

 

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