Sumary of UK inflation jumps to 3.2%, boosted by higher food and restaurant prices – business live:
- The leap in CPI inflation from 2.0% in July to a nine-year high of 3.2% in August is the first step in a rise that may take inflation to 4.5% by November.
- But as inflation will fall back almost as sharply next year, we don’t think the MPC will raise interest rates until 2023. About 0.9ppts of the rise in CPI inflation in August was due to base effects linked to the sharp fall in consumer prices in August 2020, most of which was driven by the Eat Out to Help Out restaurant discount scheme.
- The 5.9% m/m rise in hotel prices in August was much stronger than the 0.6% m/m decline you usually get at this time of year, which pushed up its inflation rate from 5.7% to 11.6%.
- And the rise in food inflation from -0.6% to +0.3% is probably due to the pass-through of higher shipping and commodity costs as well as some product shortages.
- What’s more, a further rise in inflation to at least 4.2% already seems in the bag.
- The scheduled rise in utility prices will add 0.7ppts from October and base effects will mean clothing inflation adds 0.3ppts in November.
- We’re also expecting a further pass-through of costs to mean food inflation adds at least another 0.3ppts.
- Inflation will fall sharply next year as a lot of these upward influences unwind.