Consumer prices in the United Kingdom increased 0.6 percent year-on-year in July of 2016, following a 0.5 percent rise in the previous month and beating market expectations of a 0.5 percent gain. It is the highest figure since November of 2014.
On a monthly basis, consumer prices fell 0.1 percent. Between June and July 2016, the main upward contributions came from transport prices that overall rose by 1.6 percent. Within transport, the largest upward effect came from motor fuels, with prices rising between June and July 2016, having fallen overall between the same 2 months last year. Smaller upward effects came from second-hand cars, with prices falling by less than they did a year ago and from international rail fares, which increased by more than they did last year. Alcoholic beverages and tobacco: within this category, the upward contribution came from alcoholic beverages, for which prices rose overall by 0.5 percent between June and July 2016, compared with a fall of 2.5 percent between the same 2 months last year. This was primarily due to prices for wine, which fell by less than they did a year ago, although it is important to note that last year’s fall was particularly large. Restaurants and hotels: prices, overall, rose by 0.4%, compared with a smaller rise of 0.1% a year ago. The main upward contribution came from accommodation services, in particular overnight hotel stays, for which prices rose by more than they did a year ago. Food and non-alcoholic beverages: the upward contribution came from food, for which prices, overall, fell by 0.2 percent between June and July this year compared with a larger fall of 0.7 percent between the same 2 months a year ago. The main upward effects came from certain dairy items, although the price movements were not unusual in the historic context. For example, the upward effect seen for shop-bought semi-skimmed milk was partially due to a particularly large fall in prices between June and July last year. These upward contributions were partially offset by a downward effect for meat, with prices falling between June and July 2016, having risen between the same 2 months a year ago.
The main downward contributions to the change in the CPI 12-month rate between June and July 2016 came from the following groups. Housing, water, electricity, gas and other fuels: prices, overall, were unchanged between June and July this year, having risen by 0.3 percent between the same 2 months a year ago. The downward effect came from housing rental, specifically Registered Social Landlord (RSL) rents, which saw a decrease between June and July 2016, having increased between the same 2 months last year. This may relate to the announcement in the Summer Budget 2015, which committed to reducing social housing rental prices by 1 percent per year for 4 years, starting in 2016. Recreation and culture: prices, overall, decreased by 0.1 percent this year compared with an increase of 0.2 percent a year ago. The downward effect came primarily from games and toys, particularly computer games and consoles, which fell in price between June and July this year, having risen in the same period last year. This downward effect was partially offset by an upward contribution from audio-visual equipment and related products which, overall, fell in price by less than they did last year.