Rolling coverage of the latest economic and financial news
- Introduction: UK inflation picked up last month
- ONS: Clothing and food pushed CPI higher
Several economists are predicting that the current Covid-19 restrictions will drag inflation down again in the short term.
Here’s Suren Thiru, head of economics at the British Chambers of Commerce:
@ONS data shows #UK CPI #inflation at 0.7% in October 2020, up from 0.5% in September. Increase driven largely by rising clothing & food prices.
Impact of #Lockdown2 likely to drag inflation closer to zero in the near term as restrictions stifles demand & activity. pic.twitter.com/FCbt1aGTew
“October’s inflation figures have come in slightly above expectations. Yet they reflect a disinflationary environment, given the current backdrop of weak wage growth, rising unemployment and abundant spare capacity.
“Inflation is likely to remain subdued until the economy regains most of the lost activity due to the pandemic.”
“Inflation crept up to 0.7% in October on the back of slightly higher food. While prices are on an upwards path, rises are likely to be subdued for a while longer. Covid infections are still increasing, large swathes of the UK are under strict lockdown rules, restricting opportunities to spend, and unemployment is climbing. This is not a recipe for inflation reaching its 2% target any time soon.
“Further out, however, there is light at the end of the tunnel in the form of a potential vaccine. Re-opening the economy will rekindle animal spirits. The widely-discussed shift to negative interest rates looks less likely now and this is good news for investors. The Bank of England has increased its quantitative easing programme to encourage consumer spending and investment and it should now keep its powder dry.”
Prices of second-hand cars also rose last month -- a sign that people are trying to avoid using public transport due to the pandemic.
Prices for second-hand cars have risen by 1.4% between September and October 2020, compared with a 0.2% fall between the same two months a year ago.
This upward movement continues from last month, which is reported to be because of increased demand for used cars as people seek alternatives to public transport.Continue reading...