Tuesday preview: UK inflation expected to remain muted in June

UK inflation remained well below the Bank of England’s 2% target in June, official data is expected to show on Tuesday.

The consensus forecast for the consumer price index is 0.4% year-on-year growth in June, up slightly from the 0.3% gain the previous month.

Analysts expect CPI to remain at 0.2% on a month-on-month comparison.

HSBC has pencilled in CPI at 0.3% year-on-year and 0.1% month-on-month in June. The bank said petrol prices were up 2.3% in June, reflecting pre-Brexit and pre-sterling fall data, but the retail goods sector continues to have weak pricing power.

“So food and clothing prices may well fall again,” HSBC said.

“The broadly poor weather over the spring and summer months of 2016 have distorted demand for clothing, keeping a lid on prices.

“However, June is the last month of data taken prior to the referendum. Thereafter, we expect inflation to pick up.”

UK inflation expectations have surged after Britain voted to leave the European Union on 24 June. The pound has weakened considerably against other major currencies following Brexit, making imports more expensive.

Britain will also need to renegotiate the terms of its trade deal with the EU post-Brexit. Should the new deal block the UK’s access to the single market, imports will come at a higher cost, which will likely be passed onto the consumer, sending inflation higher.

“Worries about jobs are likely to see shoppers hold back on big ticket purchases, such as cars and housing-related spending. At the same time, higher inflation off the back of sterling’s weakness will squeeze growth in real incomes,” The Guardian reported, citing Peter Spencer, chief economic adviser at EY Item Club.

Steve Varley, chairman of EY UK, said the next two years of Brexit negotiations would be challenging but the focus needs to be on making sure the UK agrees the right trade deals that allow access to key markets.

Tuesday 19 July

INTERIMS
Synectics

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Building Permits (US) (13:30)
Housing Starts (US) (13:30)

FINALS
IG Group Holdings, Versarien

AGMS
Aquatic Foods Group , Bloomsbury Publishing, Braveheart Investment Group, British Land Company, Dairy Crest Group, FirstGroup, HICL Infrastructure Company Ltd, Wizz Air Holdings

TRADING ANNOUNCEMENTS
Alliance Pharma, Gem Diamonds Ltd. (DI), Royal Mail

UK ECONOMIC ANNOUNCEMENTS
Consumer Price Index (09:30)
Producer Price Index (09:30)
Retail Price Index (09:30)