In July, the UK’s key measure of inflation was unchanged as falling fuel prices offset a rise in the cost of food and clothing. Figures showed that the Consumer Prices Index (CPI) inflation rate remained at 2.6%, however July’s Retail Prices Index (RPI) rose from 3.5% to 3.6%.
The fall in Sterling following the Brexit referendum has been the main cause for rising prices over the past year. Sterling has dropped 14% against other currencies, making imported goods more expensive for businesses and consumers. Figures released by the Office for National Statistics showed that input prices rose by 6% in July, down from 10% in June. The prices of goods leaving factories also rose at a slow rate from 3.2% to 3.3%. Despite this, consumer prices for imported goods are now not much more than they were a year ago, indicating that many businesses are absorbing some of the increase in a bid to remain competitive.
Chief Economist at KPMG UK said “The slide in the value of the pound over the past year has put significant pressure on companies’ margins. We have seen some of these costs passed on to consumers but there’s likely to be more in the pipeline. The recent rise in the price of oil, the further weakness of the pound against the Euro, along with a resilient economy, albeit growing at a slower pace, are all likely to encourage further rises to consumer prices.”
If you are worried about the rises in inflation and what effects it could have on your business, please contact one of our specialist advisors on 01275 817320.