UK inflation jumps to 1% in July as lockdown eases

UK consumer price inflation unexpectedly rose in July as Covid-19 lockdown measures eased, with clothing and fuel the main contributors.

According to figures released on Wednesday by the Office for National Statistics, CPI increased to 1% from 0.6% in June, versus expectations for it to remain unchanged. This marked the highest level since March.

Meanwhile, core inflation - which strips out volatile energy, food, alcohol and tobacco prices - rose to 1.8% in July from 1.4% in June. Economists had expected the rate to dip to 1.3%.

ONS deputy national statistician for Economic Statistics, Jonathan Athow, said: "Inflation has risen, in part, due to the largest monthly pump price increase in nearly a decade, as international oil prices rose from their lows earlier this year.

"The largest upward movement came from clothing where prices fell on the month but by less than a year ago, partly due to different sales patterns throughout the year so far.

"In addition, prices for private dental treatment, physiotherapy and haircuts have increased with the need for PPE contributing to costs for these businesses.

"Our new experimental numbers, taking into account changing spending patterns throughout the pandemic, show prices rising only a little higher than our headline inflation figures."

Ruth Gregory, senior UK economist at Capital Economics, said that while the sharp rise in CPI inflation came as a bit of a surprise, it is unlikely to mark the start of an upward trend. "CPI inflation still looks on track to fall to within a whisker of zero in August," she said.

The retail price index, which is used to calculate the cap on annual rail season ticket price rises, pushed up to 1.6% from 1.1% in June, coming in above expectations of 1.2%.