Pound hits one-year high as UK inflation rate jumps to 2.9% - as it happened
British households face a cost of living squeeze after inflation jumped in August, driven by more expensive clothing
- Latest: UK inflation jumped to 2.9% in August
- Inflation now at joint four-year high
- Clothes costs pushed up cost of living
- POUND HITS ONE-YEAR HIGH
- Core inflation at highest level since 2011
Earlier:
3.52pm BST
Right, time for a recap.
The cost of living squeeze in Britain just became more uncomfortable, after inflation unexpectedly rose in August.
New post: CPI now 2.9% up from 2.6% last month, above expectations and overshooting the Bank of England forecast https://t.co/ejwJSznzqB pic.twitter.com/JtxzzkpxvA
The markets remained dominated by the reaction to the morning's UK inflation reading, with a bit of North Korea/Hurricane Irma relief thrown in for good measure.
Related: UK cost-of-living crisis grows as dearer imports push inflation to 2.9%
3.39pm BST
Newsflash: Britain's next budget will be delivered on 22nd November.
This will be chancellor Philip Hammond's opportunity to announce new tax and spending plans, perhaps tear up the public sector pay cap, and try to guide the economy through the Brexit process.
Today I'm announcing the date of the next Budget. Watch as I explain why it's one of the most important days of the parliamentary calendar. pic.twitter.com/svSK4uK0S0
2.46pm BST
It's worth noting, though, that police and prison staff only make up 6% of the total public sector work force.
Plus, the pay increases announced today are unfunded, so savings or cuts must be made elsewhere to pay for them.
2.23pm BST
Here's another depressing, and informative, chart from the Resolution Foundation, showing how public sector workers have suffered falling real wages for much of the last decade.
Related: Public sector pay cap to be lifted next year, No 10 says
2.11pm BST
Depressingly, the rise in UK inflation will fall particularly hard on poorer families.
That's because they spend a greater proportion of their income on food, clothes and housing, where prices have risen above average this year.
This means that lower income families will be hit hardest. Poorest fifth of hhs saw change in CPIH of 0.94 compared to 0.64 for richest. pic.twitter.com/yeeR3AML1T
Inflation back up to 2.7 (CPIH) and 2.9 (CPI). Summer lull in price rises is over. pic.twitter.com/bgxwfxin43
1.48pm BST
Important media news: Rupert Murdoch's attempt to take control of Sky has hit a potentially serious hurdle.
Culture secretary Karen Bradley has just announced that she's 'minded' to refer the bid to the competition authorities on the grounds of broadcasting standards (basically, whether Fox is a fit owner).
Related: Murdochs' Sky takeover bid set to be referred to competition watchdog
12.38pm BST
Today's inflation figures will be high on the agenda when the Bank of England meets later this week to set interest rates.
Last month, the MPC voted 6-2 to leave borrowing costs unchanged, with the majority judging that the economy was too weak to justify a hike.
After latest data on UK #inflation #BOE has no more room to avoid a shrinkage in monetary policy stance @BlackPearlFX
#BOE has to hike rates. Otherwise British households will feel the heat soon.
"Increased disagreement on the MPC will likely lead to some sterling strength, in the short term at least...
But if we are a month or so away from peak inflation, to hike rates and strengthen the pound....would be overly myopic and pro-cyclical in my view.
The Overnight Index Swaps market has already rushed to price in a greater probability of a rate hike from the BOE by year end. The market now expects a 30% chance of a hike in December, this compares with 20% a week ago.
12.03pm BST
It's too late for most British holidaymakers, but the pound is rallying against the euro this morning, as well as the dollar,
Sterling has gained 1% against the European single currency to a1.112, the highest level since the start of August.
11.41am BST
We also have fresh evidence that the housing boom in Britain's capital is faltering.
London house prices rose by just 2.8% in the 12 months to July 2017, much slower than the national average of 5.1%.
House price slowdown? Depends where you live. Prices barely rising in London, but still motoring in Midlands and SW: pic.twitter.com/K5D14BVzYC
11.04am BST
Public sector workers will see their real wages shrink by around 2% this year, unless the pay cap is dropped.
Liberal Democrat leader Vince Cable says Theresa May's government needs to act urgently:
"Rising inflation shows how urgent it is to address the sense of unfairness around the pay cap.
"With these numbers our nurses, teachers and other public sector workers will experience a 2% pay cut in the coming year. This will only aggravate the recruitment and retention crisis we are facing.
11.00am BST
Andrew Sentance of PwC (and a former Bank of England interest-rate setter) fears that inflation will keep rising as the full impact of the weak pound ripples through the economy.
He predicts that the consumer prices index will rise over 3% later this year, weakening growth.
With very well-developed and complex supply chains, it can take a number of years for a decline in the exchange rate, which raises import prices, to feed through fully to consumers.
"This suggests that the recent squeeze on consumer spending from higher inflation will continue to dampen growth in the UK economy in the second half of this year and next year. There is not much sign yet that consumers will get any early relief from the surge in inflation following the Brexit vote last summer."
10.50am BST
The pound has now clawed back half of the losses suffered after the Brexit vote, but is still worth 10% less than in June 2016.
Sterling hits 1-year high v dollar of $1.3250.
It's now -10% since Brexit vote ... and +10% from post-Brexit (and 31-year) low in January. pic.twitter.com/5mn6cQcsgO
10.39am BST
Britain is now suffering its SECOND cost of living squeeze in a decade.
As thus chart shows, inflation (in pink) outpaced wage growth once the financial crisis began in 2008. Real wages didn't turn positive until 2014, but have been shrinking since early 2017.
UK consumer price inflation has picked up to 2.9%. The squeeze on living standards persists as pay growth struggles to keep up. pic.twitter.com/vvZAp8kK7Z
10.33am BST
The Treasury have sent a comment over, but it doesn't reveal whether the public sector pay cap is being axed....
'We know some families have concerns with their day to day cost of living.
That's why we are boosting take home pay with tax cuts for over 30 million people and a National Living Wage that is giving the lowest earners their fastest pay rise for 20 years.'
10.30am BST
Ranko Berich, Head of Market Analysis at Monex Europe, says Britain's inflation rate has "smashed expectations", which is why the pound spiked to one-year high.
He fears that it will hurt consumer spending in the coming months (which will be bad for growth).
"The breadth of today's inflation surprise is striking. All of the headline price indices, including Core CPI, PPI and RPI printed higher than median forecasts. The record 4.6% increase in clothing and footwear indicates that retailers are passing cost increases straight to consumers.
On the whole, today's figures highlight just how hard inflation is continuing to bite into real wages, although it will be interesting to see how nominal wages perform in tomorrow's labour market data. As real wages fall, consumer spending is likely to come under further pressure this year, after a wobble in the first quarter.
10.25am BST
City economists are concerned to see that Britain's 'core' inflation rate has hit a six-year high, at 2.7%.
Core inflation strips out volatile factors like petrol and food, and is meant to give a better picture of economic pressures.
UK core inflation at 2.7% in August, which is the highest reading since 2011. This could fuel "hawkish talk" from the BoE on Thursday... pic.twitter.com/JCFjA0rP38
If I'm on the #MPC this is the inflation chart that I'd be worried about. Core inflation up from 2.5% to 2.7%y/y in August with more to come pic.twitter.com/ZcQbrW60L9
10.19am BST
Edward Hardy, economist at currency firm WorldFirst, blames bad weather and geopolitical worries for driving inflation up.
Hardy says:
"Petrol prices have come back to bite: after two months of stagnant energy costs, weather disruption in the Gulf of Mexico twinned with geopolitical tensions on the Korean peninsula have lit a fire under commodity prices .
10.15am BST
Britain's inflation rate has been driven up by the slump in the pound in the summer of 2016, after the Brexit vote.
Ben Brettell, senior economist at Hargreaves Lansdown, suspects that UK inflation may now be peaking.
Inflation ticked up again in August, with increased petrol and diesel prices contributing to a year-on-year figure of 2.9%, up from 2.6% in July and matching May's four-year high.
This will inevitably raise questions about the UK's ongoing cost of living squeeze. Data released tomorrow is expected to show pay increasing at 2.2% in the three months to July, meaning wages are still shrinking in real terms.
10.09am BST
Trade unions say the UK government must now drop its pay cap on public sector workers, to give them more protection against inflation.
"The cost of living squeeze continues, with rising inflation outpacing wages.
"The government needs to get a grip and get pay rising across the economy. A good start would be to scrap the pay cap for all public sector workers.
"Our dedicated public servants are a team. A pick and mix approach, that rewards some and not others, would be cynical and plain unfair."
9.59am BST
Boom! The pound has hit a one-year high against the US dollar, following the spike in the cost of living.
Sterling has gained a whole cent against the dollar to hit $1.3280, the strongest level since mid-September 2016.
The pound has reached a one-year high against the dollar following strong UK inflation stats #GBPUSD
9.52am BST
On an annual basis, clothing and footwear inflation in Britain has hit 4.6%.
That's the highest level since the last days of the Thatcher administration, according to City economist Simon French of Panmure Gordon.
UK Clothing & Footwear prices rising at fastest rate since 1989. Back then I was too young to choose my own stuff - resembled a 1950s kid pic.twitter.com/8V9Np8TKwh
9.49am BST
Buying clothes became rather pricier last month....
9.43am BST
Clothing and travel costs drove the cost of living up in August.
Average clothing prices jumped by 2.4% between July and August 2017, with women's clothing becoming particularly pricier.
9.38am BST
This chart shows how the consumer prices index (in yellow) has risen sharply over the last year - back to levels seen in May this year, and in June 2013.
9.34am BST
BREAKING: Britain's inflation rate has jumped to 2.9% in August, from 2.6% in July.
That equals the four-year high struck in May this year.
9.28am BST
The pound just hit a four-week against the euro, at 90.605p.....
9.26am BST
Stand by your Desks! UK inflation data is due in a few minutes #CPI #RPI
9.15am BST
Economist Marc Bri1/4tsch of Swiss Life predicts that UK inflation spiked to 2.9% in August, from 2.6% in July.
Later today: Publication of #UK CPI data. We expect annual #inflation to rise to 2.9% (vs. consensus forecast of 2.8%) pic.twitter.com/oYnKbh2Mvx
RBC on UK inflation: Look for 2.8% Y/Y as a reflection of GBP depreciation. Exp. CPI to peak at 3.1% in October before pulling back in 2018
9.12am BST
Expectations that Britain's inflation rate rose in August are pushing sterling higher this morning.
The pound is up almost half a cent at $1.321 against the US dollar.
8.55am BST
It says something about the financial markets that shares can rally on the back of a devastating storm that was only slightly less awful than feared.
"Whether that equity reaction is Panglossian complacency or a sign of wonderful underlying fundamentals remains open to question.
Even Category 5 storms can now be added to the list of things that 'Don't Really Matter'.
Apparently the problem for markets was the media, not a hurricane the size of France. https://t.co/LRUOxh7NlE pic.twitter.com/rNUBb8IET0
8.36am BST
European stock markets are pushing higher in early trading, as the momentum from Wall Street's rally ripples back to the City.
Investors are surely feeling less concerned about the potential hurricane damage cost. This has brought back the traditional risk on trade.
8.24am BST
The new (and watered down) sanctions on North Korea agreed by the United Nations last night are also boosting the markets today, says Matt Simpson, senior market analyst at Faraday Research.
Related: North Korea sanctions: UN security council unanimously agrees new measures
8.09am BST
World stock markets are at record highs this morning, thanks to relief that the economic cost of hurricane Irma will probably be lower than feared.
Last night, America's S&P 500 index finished at its highest ever level, with insurance firms surging.
Firmer European open in prospect as stock indices respond to strong rally across Wall Street. FTSE called 15 higher
Related: Florida Keys facing potential 'humanitarian crisis' in Irma aftermath
Tuesday's FINANCIAL TIMES: Irma's change of course bring relief to insurers and Wall St #tomorrowspaperstoday pic.twitter.com/AEv7CLqYig
The front page of today's Tampa Bay Times: pic.twitter.com/O3hw3heOev
7.46am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial market, the eurozone and business.
"For road users, petrol prices are up after the respite given by lower prices over the summer.
"Driving to work cost 5% more in August and early September than last year."
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