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UK Inflation Rose More Than Expected in July

The speed of the UK’s recovery from the coronavirus lockdown continues to generate debate. Among the latest figures to be released, we can see that inflation rose by more than expected in July, while some sectors are returning to normal faster than others.

The Inflation Figures

The Office for National Statistics (ONS) recently reported that the consumer prices index was up by 1% on a year-by-year basis. This follows on from 0.6% in June. Previously, experts surveyed by Bloomberg had predicted that it would rise by 0.7%.

Part of the reason for this increase in inflation is the recovery in prices for clothing and petrol following the relaxing of lockdown restrictions. Another area driving the growth is tourism, as the price of holidays starts to rise again with more people looking to get away.

Packaged holidays are back on the cards and helping to drive spending on tourism according to Andy King, who is the head of CPI production at the ONS. This type of holiday saw a 5.6% increase in price from July 2019.

Camping equipment was another area that helped push up prices. With many people choosing to get away on a budget camping break, this type of equipment was up by 6.4% in a year. This was the biggest increase seen in this area in the last 3 years.

The Bank of England has targeted an inflation rate of 2% and has already put in place measures designed to stimulate the national economy. Early signs after the inflation data was released were that this positive news had helped boost Sterling.

The Areas That Are Falling Less Sharply

Petrol prices didn’t rise in the period looked at. However, they fell less sharply than has been the case in recent months. The drop, when compared to July 2019, was 12.5%. This is better than the 16.9% drop that had been noted in June.

Jonathan Athow is deputy national statistician at the ONS. He pointed out that part of the reason for the rise in inflation was the “largest monthly pump price increase in nearly a decade”. The month-on-month increase was 4.5%, and was driven by rising international oil prices.

Another important element in the numbers was the fact that clothing fell by less than in previous months. This is partly explained by the fact that the traditional sales at this time of year have been suspended in 2020.

Clothing and footwear was down by just 0.2% in July, compared to the year before. This is a notable improvement on the 2.3% decline seen in June. The slump that has caused many businesses to turn to the debt collection process may finally be easing.

Core inflation excludes food, alcoholic drinks and tobacco. This number was 1.8% on an annual basis, which is a return to the sort of figure seen last July.

Other Sectors That Have Improved

There has been positive news in some other sectors of the economy too. For example, since the lockdown began the number of people doing a weekly grocery shop online has doubled. A quarter of Brits now buy food and other essentials online at least once a week.

New and used car sales have also increased. The numbers for July show that sales were up by 17% in July, which is traditionally a very slow month. This comes after a devastating 38% decline in the first half of 2020.