House price growth slows to five-year low

Gladys Abbott
August 16, 2018

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.

The Consumer Price Index rose to 2.5 per cent in July, up from 2.4 per cent in June, the first rise recorded since November 2017, said the Office for National Statistics.

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.

Households were knocked with a rise in transport prices as they embarked on summer holidays, with prices climbing by 5.7pc compared with the same month a year before.

Within the index, food category inflation was 1.73% in July, easing from 3.11% in June.

He said that this category, coupled with the transport and communication group, is expected to exert pressure on retail inflation.

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The increase in fuel costs, which have pushed the cost of unleaded petrol above £1.30 a litre in many parts of the country, prompted warnings that inflation would remain well above the Bank of England's 2% target for the rest of the year.

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 measure excludes 5% of the highest and lowest price changes.

"The core CPI inflation recorded only a mild decline in July 2018, with an uptick in inflation for miscellaneous items weighing against the correction in the other components", said Aditi Nayar, principal economist at ICRA.

On a month-on-month basis, July food inflation was highest in Kwara (4.57%), Kaduna (3.99%) and Imo (3.44%), while Ogun (0.16%) and Osun (0.38%) recorded the slowest rise. The fall can not be explained by the summer sales, as the fraction of goods and services at sales prices was the lowest since 2012. However, a depreciating rupee, which hit an all-time high on Monday at 69.93 against the dollar, and volatile crude oil prices, may lead to considerable uncertainty over inflation.

"Based on this analysis, CPI inflation is set to return to the 2% target over the year ahead".

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