15th July 2014
The rate of UK inflation rose sharply in June to 1.9% as prices for clothing, food and drink rose the Office for National Statistics reported today.
The Government’s preferred Consumer Price Index rose 0.4% up from 1.5% in May, according to the Office for National Statistics.
The rate is now just below the Bank of England’s 2% target having remained below the target for seven consecutive months.
Experts say the rise will strengthen the case for a rise in UK interest rates from the record low of 0.5%.
In a separate ONS survey, UK house prices increased by 10.5% in the year to May 2014, up from 9.9% in the year to April 2014.
House price annual inflation was 11.0% in England, 6.5% in Wales, 3.6% in Scotland and -0.7% in Northern Ireland.
Annual house price increases in England were driven by a record annual increase in London of 20.1% and to a lesser extent increases in the South East (9.6%) and the East (8.6%).
Excluding London and the South East, UK house prices increased by 6.4% in the 12 months to May 2014.
On a seasonally adjusted basis, average house prices increased by 0.8% between April and May 2014. In May 2014, prices paid by first-time buyers were 11.3% higher on average than in May 2013. For owner-occupiers (existing owners), prices increased by 10.1% for the same period.
Orla Garvey, Sovereign Fund Manager at Aviva Investors, says: “The main surprises in the UK inflation rate figures announced today were in food and clothing. The increase in food prices was unexpected, given the ongoing supermarket price war, but this is probably reflecting fewer items being discounted than the previous month. While it is ongoing, the competitive discounting has probably begun to run out of steam. We should expect some pay back next month in clothing as we did not get the usual seasonal discounting. While this is a strong number, we do not think it necessarily changes the monetary policy debate, which should remain focused on earnings and the evolution of unemployment. At the very least, it should give investors who are worried that the BoE will not raise interest rates in line with market expectations less cause for concern.”