A shopper carries a basket in a supermarket in London
British inflation jumped unexpectedly to a six-month high in August, pushed up by bigger-than-usual seasonal increases in sea and air fares and higher theatre admission prices, official data showed on Wednesday.
Consumer price inflation rose at an annual rate of 2.7 percent in August, compared with 2.5 percent in July, the Office for National Statistics said, above all forecasts in a Reuters poll of economists that had pointed to a fall to 2.4 percent. The ONS also said British house prices rose at the weakest annual rate in nearly five years, dragged down by the biggest drop in London house prices since 2009.
Wednesday's figures are likely to surprise Bank of England officials who last month raised interest rates for the second time since the financial crisis and signalled only a gradual rise in borrowing costs in the coming years. Last week the BoE said it expected inflation to cool to 2.4 percent in August. The rise in inflation in August could present a setback to the modest recovery in real-terms wage growth that has helped to support economic growth this year. The fall in the value of the pound in August on renewed concerns about Brexit deprived consumers of the benefit of a fall in oil prices in annual terms, the ONS figures showed.
"Consumers paid more for theatre shows, sea fares and new autumn clothing last month," ONS statistician Mike Hardie said. The BoE expects inflation will drift down to just above its 2 percent target in two years' time as it gradually raises borrowing costs.
Consumer price inflation hit a five-year high of 3.1 percent in November, when the inflationary effect of the pound's tumble after Brexit vote in June 2016 reached its peak. The ONS said house prices in July rose by an annual 3.1 percent across the United Kingdom as a whole compared with 3.2 percent in June -- the weakest increase since August 2013. House prices in London alone fell 0.7 percent year-on-year in July, the biggest drop since September 2009.
British businesses are more worried about Brexit uncertainty than was the case a few months ago, Bank of England chief economist Andy Haldane said on Wednesday."While mentions of Brexit have fallen from their referendum peak, it is notable that they have picked up sharply over the past few months, with measures of uncertainty following suit," Haldane said in a speech at Estonia's central bank.Haldane was referring to an analysis of businesses conversations with its network of regional staff.Last month the BoE raised interest rates to 0.75 percent, only its second increase since before the financial crisis more than a decade ago.Economists polled by Reuters do not expect the BoE to raise rates again until after Britain leaves the European Union in March next year.The bulk of Haldane's speech focused on how central bank communication could win public trust at a time of widespread distrust of traditional institutions.He defended the central bank's policy of 'forward guidance' on interest rates, which he said had given households and businesses a useful steer, even if some financial market participants found it lacking."Pricing interest rates in financial markets was not the main purpose of forward guidance in the first place," he said. "By allaying fears about too-rapid a rise in rates, it is likely to have encouraged spending and supported the economy," he added. UK Brexit minister sees no alternative to Irish border planBrexit deal possible if EU market integrity kept: EU's BarnierJaguar Land Rover to cut output at UK car plant after warnings on BrexitUK PM May's spokesman: We are confident of reaching Brexit deal
Bank of England's Haldane says firms' Brexit worries up sharply