UK inflation accelerated in August as the end of seasonal discounts boosted prices for items such as clothes and furniture.
Consumer prices rose 4.5 per cent from a year earlier, the fastest in three months, compared with 4.4 per cent in July. A separate report showed exports and imports rose to record levels in July.
The Bank of England left its key interest rate at a record low last week as policy makers attempted to steer a path between a faltering recovery and inflation that's more than double their goal. While the central bank forecasts price growth may accelerate to 5 per cent in the coming months, Goldman Sachs and Citigroup have said the central bank may resume emergency asset purchases by November to boost growth.
"Even though inflation is higher than the bank wants and will go higher in the months ahead, their strategy has been through most of this year is to focus more on growth" said Peter Dixon, an economist at Commerzbank AG in London. "The outlook is pretty grim. Quantitative easing is increasingly going to be an item on the agenda."
The pound remained lower against the dollar after the data were released. It was at $1.5777 as of 9:48 am in London, down 0.5 per cent from yesterday. It earlier dropped to $1.5762, the lowest in eight months.
On the month, consumer prices rose 0.6 per cent in August, the statistics office said. Clothes prices jumped 3.7 per cent, a record for an August, while household utility costs increased 0.5 per cent. So-called core inflation, which excludes costs of energy, alcohol, food and tobacco, remained at 3.1 per cent in August from the previous month.
Retail price inflation, a measure of the cost of living used in wage negotiations, accelerated to 5.2 per cent from 5 per cent.Economists forecast a reading of 5.1 per cent. Excluding mortgage costs, it was at 5.3 percent.
British consumers are seeing their spending power erased at the fastest pace since the 1970s as wage growth fails to keep up with inflation and the government implements the biggest budget cuts since World War II.
Consumer price pressures are being fuelled as British utility companies boost electricity and gas prices because of rising commodity costs earlier in the year.
The UK economy grew just 0.2 per cent in the nine months through June and gauges of manufacturing, services and construction growth all declined in August. In a separate report, the statistics office said the UK goods trade deficit widened to £8.92 billion in July from £8.87 billion in June. While exports rose 2 per cent on the month, that was outpaced by a 3.8 per cent jump in imports. Both rose to record levels. The trade gap in goods and services was £4.45 billion, compared with £4.5 billion in June, the statistics office said.
Bloomberg
