U.K. inflation rate posts most significant increase since records began

U.K.-inflation -posts -significant-increase-since-records-began

September 16, 2021: -The U.K.’s consumer prices index surged by 3.2% in the 12 months to August, and official data showed on Wednesday the largest ever month-on-month increase since records started in Jan. 1997.

A Reuters poll had predicted a reading of 2.9% for August. The index increased 2.0% in July on an annual basis.

The Office for National Statistics published the data, noting that the surge was “likely to be a temporary change” and said the U.K. government’s “Eat Out to Help Out” program in the previous year may have accentuated the jump.

“In August 2020, the prices in restaurants and cafes were discounted because of the government’s Eat Out to Help Out scheme, which offered customers half-price food and drinks to eat or drink in (up to the value of £10) amid Mondays and Wednesdays,” the ONS said in its statement.

“Because EOHO was a short-term scheme, the upward shift in the August 2021 12-month inflation rate is to be temporary.”

The reading is again above the Bank of England’s target of 2% and will add weight to those calling to finish to unprecedented pandemic-era stimulus policies. It also comes between rising energy prices and as the country keeps on to strict coronavirus lockdowns.

Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics, also highlighted that used car prices were blamed for the upside surprise.

“The larger-than-normal increase in the core CPI in August for each month also was mainly because of the highest 4.9% rise in used car prices, which pushed up that component’s inflation rate to an eye-catching 18.3%,” he said.

Going forward, he added that the headline rate of the CPI won’t likely increase further in September because restaurant prices had rebounded at this point last year.

But he further said that an increase in an energy price cap and again on a tax levy on the tourism industry could both contribute to a jump in October.

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