United Kingdom inflation rises for first time in 2018, London house prices fall

United Kingdom inflation rises for first time in 2018, London house prices fall

It was the first time since November that inflation gained pace, slowing the recovery in spending power for many households, even if inflation is expected to fall back in the coming months.

In England, house prices increased by 2.7 per cent over the year to June 2018, with the average price now standing at £245,000.

The Consumer Price Index (CPI), which measured inflation continued on downward trend in July by dropping to 11.14 per cent (year-on-year) from 11.

Significant increases in the minimum support prices (MSPs) across crops on 4 July, after a modest hike over the past four years, are likely to add 70bps to retail inflation, according to India Ratings and Research.

RBI, in its monetary policy review on 1 August, had increased its policy rate by 25 basis points (bps) for the second time in two months, blaming rising inflation risks.

Much of that cost pressure has been caused by oil price increases of more than 50% over the period. The June round of the RBI's survey of households reported a further uptick of 20bps in inflation expectations, for both three-month and one-year ahead horizons, compared with the last round.

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House prices in Britain are rising at their slowest pace in nearly five years as subdued demand and rising mortgage costs weigh on the property market. Other price rises in July included transport (0.7%) and food (0.5%).

Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, said a pick-up in the cost of recreational goods and services to 3.1%, from 2.4% in June, mostly related to computer games, was another reason for the rise in average prices.

Tej Parikh, senior economist at the Institute of Directors, said the rise in inflation showed the cost of living squeeze was not yet a thing of the past.

The average price of flats and maisonettes increased by 0.5 per cent in the year to June 2018, to £204,000, the lowest annual growth of all property types.

Inflation rose last month, largely due to higher transport costs, new official figures show. However for eggs, cereals and products as also oil and fats the rate of price rise was higher than in June.

Despite the rise for CPI, wage growth is still outstripping inflation.

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