UK inflation rises to highest level in nearly 3 yrs
LONDON, July 15, (AP): Official figures show inflation in the UK rising to its highest level in nearly three years because of increases in the prices of food and motor fuel.
The Office for National Statistics said Wednesday that the annual rate of inflation rose to 2.5% in June from 2.1% the previous month. June’s rate is the highest August 2018 when inflation hit 2.7%.
The increase has moved inflation further above the Bank of England’s target of 2% and has stoked speculation that the U.K’s central bank will have to respond at some stage soon to keep a lid on price pressures in the economy.
Many countries around the world are experiencing a sharp increase in inflation as their economies recover from the shock of the onset of the coronavirus pandemic. On Tuesday, official figures showed the U.S.’s annual inflation rate running at a 13year high of 5.4%.
Central banks around the world are hoping that the sharp spike in inflation is due to temporary factors related to pent-up demand and supply pressures, which will wind down over months to come.
“Policymakers are pricing in a recovery that is just right, with strong growth and temporarily higher inflation,” said Debapratim De, senior economist at Deloitte. “That seems likely. But it is by no means assured.”
Meanwhile, the U.K.’s jobs recovery has continued apace as lockdown restrictions were eased and the rapid rollout of coronavirus vaccines shored up confidence in the wider economy, official figures showed Thursday.
Support
However, economists cautioned against complacency amid concerns over the sharp pick-up in infections and the upcoming end of a salary support scheme.
The Office for National Statistics said the country saw the number of workers on payroll jump by 356,000 in June. That’s the biggest monthly increase since equivalent records began in 2014.
The statistics agency said the gradual easing of lockdown restrictions during the spring, particularly the reopening of the hospitality sector drove the recovery.
“This was especially marked for younger people, who had been hardest hit by earlier lockdowns,” said Darren Morgan, the agency’s director of economic statistics.
Firms are expected to be further on the hunt for workers ahead of the final lifting of restrictions in England on July 19, when all legal limits on social contact are to be ditched. The other nations of the U.K. have also been lifting restrictions but a little bit slower than in England.
Despite seven months of increases, the number of payrolled workers has still fallen by 206,000 since the pandemic struck in March last year.
Overall, the statistics agency said the jobless rate was unchanged at 4.8% in May - the unemployment figures are conducted separately to the more timely payroll data.
At the outset of the pandemic, there were fears that unemployment would rise sharply to over 10% but a British government salary support scheme helped limit the number of people losing their job during the pandemic.
“We are bouncing back,” said Treasury chief Rishi Sunak. “The number of employees on payrolls is at its highest level since last April and the number of people on furlough halved in the three months to May.”
That Job Retention Scheme, which at its most generous saw the government paying 80% of the salaries of those unable to work because of the restrictions, is being phased out and is due to end at the end of September.
Spike
There are concerns that unemployment will spike then, especially if the current resurgence of the virus as a result of the spread of the delta variant forces the government to reimpose restrictions.
“These encouraging signs must not breed complacency among policy makers,” said Nye Cominetti, senior economist at the Resolution Foundation think tank.
“The U.K.’s jobs recovery is far from complete, and big challenges lie ahead as the spread of the virus continues, and the furlough scheme ends - just as unemployment support is set to be cut.”