UK inflation rate accelerates on fuel, transport, games

[LONDON] UK inflation accelerated for the first time in eight months in July, boosted by the cost of auto fuel, transport tickets, computer games and food.

Annual consumer-price growth quickened to 2.5 per cent from 2.4 per cent in June, as economists forecast, figures from the Office for National Statistics Wednesday show.

The Bank of England had predicted inflation would pickup to 2.6 per cent in July before resuming its downward path as the effect of sterling's post-Brexit referendum decline fades.

Officials raised interest rates this month to tame price pressures in the labor market and indicated further hikes will be needed to return inflation to the two per cent target, providing Britain avoids a chaotic Brexit.

Upward pressures on inflation were offset by some financial services and clothing and footwear prices, which fell 3.7 per cent on the month as struggling retailers extended summer discounts. The drop in women's clothing prices was particularly marked.

Core inflation, which excludes food, energy, tobacco and alcoholic drinks, stayed at 1.9 per cent. The pound was 0.2 per cent weaker at US$1.27 as of 9.39am London time.

Rail Fares

July's retail-price inflation rate, which is used by rail carriers to set fare increases, slowed to 3.2 per cent. There is pressure to link rail fares to the lower CPI rate to ease the strain on consumers whose basic wages are barely growing faster than prices.

Producer input prices rose 0.5 per cent, taking the annual rate of increase to 10.9 per cent with oil accounting for much of the gain. Factories, however, have chosen to absorb the pressure rather than pass it on to consumers with output prices rising just 3.1 per cent.

House prices rose an annual three per cent in June, the least since August 2013. The worst-performing region was London, where prices dropped 0.7 per cent - the most since 2009 - as Brexit fears and stretched affordability sapped demand.

BLOOMBERG