U.K. Import Prices Surge After Brexit Vote
16 August 2016, 08:51
By Jason Douglas and David Hodari
LONDON--A sharp fall in the pound since the U.K. voted to leave the European Union pushed up import prices in July at the fastest pace in five years, which may foreshadow a broader acceleration in inflation in Britain following June's Brexit vote.
Import prices rose 6.5% on the year in July, the Office for National Statistics said Tuesday, the fastest annual rate of growth since 2011. That pushed up companies' overall raw material costs by 4.3%, the quickest increase since 2013.
The acceleration in companies' costs suggests price increases for consumers may be coming. Consumer-price inflation rose 0.6% on the year in July, up from 0.5% in June. That is still well below the Bank of England's 2% target, but central-bank officials expect inflation to accelerate this year and next as sterling's slide works its way through the economy.
The pound has fallen more than 10% against the dollar since voters' chose to leave the EU on June 23, and by a similar amount against the currencies of the U.K.'s other main trading partners. Prices charged by companies at the factory gate rose 0.3% in July, the ONS said, the first annual rise in wholesale prices in two years.
The rise in import prices is one of the first pieces of official data covering developments in the economy since the referendum. Further data will be published this week on U.K. retail sales and public finances. Official data for growth in the economy in the third quarter will be published in October.
Surveys and similar gauges of activity have painted a mixed picture of the economy in the wake of the vote. Consumer confidence fell in July, a survey found, but a retailers' trade group reported that warm weather buoyed spending in stores. The BOE's network of regional agents found that exporters welcomed the falling pound, which makes British goods and services cheaper for foreign buyers. The agents also reported that companies haven't shelved hiring and investment plans just yet but may revisit them in the future.
The BOE cut its benchmark interest rate in August as part of a package of stimulus measures to support the economy. Officials expect the uncertainty triggered by the Brexit vote to weigh on the economy for some time.