As the economy reopens, UK inflation reaches a nine-year high.
On the reopening economy, annual inflation in the United Kingdom rose to a nine-year high in August, but last year’s figure was skewed by a restaurant discount plan, according to official data released Wednesday.
According to the Office for National Statistics, the Consumer Prices Index (CPI) rose to 3.2 percent, the highest level since March 2012.
The increase was a new high, up from 2.0 percent in July, but the ONS warned that it would only be temporary.
Concerns that central banks will end Covid support measures to curb inflation have thrown global markets for a loop this year, but authorities say that price spikes will be temporary.
The Bank of England, on the other hand, has predicted that inflation will hit 4.0 percent in the fourth quarter, double its objective, due to reopening economies and a worldwide supply bottleneck triggered by the pandemic.
“August marked the highest month-on-month increase in annual inflation since the series began roughly a quarter-century ago,” said ONS statistician Jonathan Athow.
“However, much of this is likely to be temporary, as restaurant and cafe costs dropped significantly last year as a result of the ‘Eat Out To Help Out’ scheme, while prices soared this year.”
The discount scheme and temporary tax cuts targeted at bolstering the Covid-hit economy have kept inflation low in August 2020.
“The great majority of August’s increase was due to comparisons with a weak 2020, with both the VAT cut for the hospitality sector and the Eat Out to Help Out scheme having been implemented in August last year,” said EY economist Martin Beck.
Manufacturers are facing massive cost increases, according to the ONS.
In the year to August, raw materials increased by 11%, compared to 10.4% in July.
As a result of the tenacious epidemic, supply chain bottlenecks, and rising commodity prices, the UK’s economic recovery is flattening.
According to latest data, the GDP increased by only 0.1 percent in July, compared to 1.0 percent in June.
Economists are concerned that rising global inflation will continue to stymie the global recovery.
Because of the “persistent” pandemic, costs in the UK will continue to rise this year, according to Bank of England governor Andrew Bailey.
Bailey noted last week, “We’ve had two things going on globally.”
“The first is an increase in global demand, notably for products, which has put upward pressure on commodity prices.
“The second issue is the disparity in goods and services. In comparison to services, we have a considerably larger desire for commodities. Brief News from Washington Newsday.