- UK CPI fell to 2.6% in June below expectations
- The falling price at the pump made the biggest impact but food inflation also cooled
- But the reprieve is likely to be temporary with households braced for another energy squeeze
Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK inflation figures:
“People are acutely aware of the growing cost of living their lives. They’re sensitive to how much they are paying to fill up their cars, the changing price of their weekly shop and the myriad of household bills that need to be paid.
“June was like a breath of fresh air for many cash strapped families who will have noticed that the price at the pump fell significantly, for the first time since the conflict in the Middle East began at the end of February.
“Those with a sweet tooth will have marvelled as the price of jam, sugar and chocolate all eased back along with dairy and oils. Even a slight jump in the cost of BBQ burgers and veggies felt almost manageable as supermarkets began their World Cup discounts.
“As temperatures shot up clothing retailers jumped on the opportunity to persuade us to bag a new pair of shorts, with summer sales something we all expect. But this year found many of the discounts were even more generous as businesses tried to tempt cautious consumers to part with their cash.
“People were still enjoying the benefits of April’s fall in the price cap, thanks to changes brought about by the previous chancellor but those savings are set to be short-lived even with the new government’s VAT cut on domestic electricity.
“The resumption of hostilities in the Middle East has seen wholesale prices of gas and oil jump, with the price of Brent crude now rounding $93 a barrel and motorists already experiencing climbing prices.
“For Andy Burnham it’s a tantalising glimpse of what might have been if geopolitics hadn’t thrown a spanner in the works, with UK inflation in June below that of the EU – although it was above that of both France and Germany.
“For the Bank of England, it’s likely to buy them another month to consider their options. Market expectation of an interest rate hold at next week’s meeting firmed up on release of the data.
“But rate setters will face the real test in September. The vote split and updated forecast will be closely watched for clues about how many hikes may be required to keep the economy in check.”
