In August this year, the UK’s inflation rate rose to a six month high of 2.7%.
However, wages have been rising at a higher rate than inflation.
Data was released last week by the Office for National Statistics (ONS) showing that wages rose by 2.9% between May and July this year.
In July, the Consumer Prices Index rate was at 2.5%. This rise was the first increase in the index rate since November 2017.
Head of inflation at the ONS, Mike Hardie, stated:
“Consumers paid more for theatre shows, sea fares and new season autumn clothing last month. However, mobile phone charges, and furniture and household goods had a downward effect on inflation.”
According to the ONS report, prices for lifestyle and recreational products, transport and clothing rose significantly compared to the prices of furniture, communications and household products.
Transport costs rose due to inflation due to the rise in sea and air fares. Prices of petrol rose by 1.4 pence between July and August compared to the 1.8 pence rise from the previous year.
On average, the prices of footwear and clothing rose by 3.1% between the two months which was a great deal more significant than the year before which was at 2.4%.
Senior economist, Alastair Neame stated:
“Today’s inflation data show the rate of price growth accelerated in August, and may well prove to have exceeded total earnings growth in the same period. Unless UK workers can increase their productivity, this trend is likely to continue – squeezing living standards over the medium term.”
The pound increased in value to $1.32 after the news was released about in July. The pound then decreased again to $1.3140 after Eu chief Brexit negotiator, Michel Barnier, expressed his opinion on the Irish border question.
Interest rates are expected to rise slowly over the next few years said senior economist Ben Brettell from Hargreaves Lansdown.
The current interest rate in the UK is 0.75% which is the highest it has been since 2009. The Bank of England raised the interest rate for the second time in a decade.
It also predicted that the inflation rate will decrease to 2% by the year 2020.
“The figures won’t come as welcome news to the Bank of England, though – they’ll be desperate to leave policy unchanged until we get some clarity over Brexit and won’t want to be forced into a rate rise by accelerating prices,” stated Brettell.