2023-09-20 07:16:04
Inflation fell very slightly in August in the United Kingdom, to 6.7% over one year, the lowest since February 2022, surprising economists who predicted an increase in the wake of a recovery in fuel prices.
In July, inflation reached 6.8%, recalls the National Statistics Office (ONS) in its monthly report on Wednesday. It specifies that food prices are those which contributed the most to the decline in August, with those of services, tempered by a rebound in fuel prices, specifies the ONS. Chancellor of the Exchequer Jeremy Hunt welcomed plan to tackle inflation “which works» while recognizing that this rate remains “too high».
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The market had anticipated a rate of 7.1% for August following a recovery in fuel prices, and the pound sterling therefore reacted downward: it fell -0.26% to 1.2361 dollars around 6:50 a.m. GMT. Lower inflation points to less monetary tightening by the Bank of England (BoE), which will announce a new rate decision on Thursday.
The unexpected decline in inflationwill probably not be enough to prevent the Bank of England from increasing interest rates from 5.25% to 5.5%» Thursday but «reinforces our prediction that this will be the last» increase in the current cycle of monetary tightening, estimates Paul Dales of Capital Economics. An opinion shared by Samuel Tombs of Pantheon Macro. He expects inflation to start rising once more for the month of September, but then to ease in the last months of the year to end at 5%.
The BoE’s tightening has contributed to a surge in borrowing costs, particularly for real estate, which is putting pressure on household finances, already strained by soaring prices. Factor which compensates for this crisis in purchasing power, but which goes in the direction of a stronger monetary tightening: salaries excluding bonuses are increasing on average at a very rapid pace – 7.8% for the period from May to July – particularly in the wake of strike movements which have affected a very large part of the sectors of the economy for more than a year.
However, several negative signals have accumulated on the British economic horizon: the unemployment rate rose to 4.3% for the three months ended at the end of July, reflecting economic activity which is running out of steam in the country. As for the gross domestic product (GDP), it contracted by 0.5% in July, more than expected, suffering from strikes in health and education and rainy weather which discouraged purchases in the stores. Some economists argue that this is the start of the recession that has been expected for months but has so far not materialized.
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