An upcoming official data release is poised to uncover yet another deceleration in inflation, following a decline in energy prices during July, according to a report. This situation unfolds in the wake of a notable surge in wages, adding to the mounting pressure on the Bank of England.
The central bank faces the dual challenge of addressing inflation and sustaining recent hikes in interest rates. Economists, drawing a collective consensus, anticipate that the Office for National Statistics (ONS) will reveal a Consumer Prices Index (CPI) inflation rate of 6.7% for July, marking a decrease from the previous month's 7.9%.
This decrease can be attributed in part to the reduction in energy prices, which moderated after the volatility caused by the Russian incursion into Ukraine subsided. At the start of July, the cost per unit of electricity consumed was notably lowered to 30p per unit, while gas prices dropped to 8p per unit. As a result, the average annual energy expenses for households decreased to £2,074 from the previous capped rate of £2,500. Moreover, the latest industry survey data indicates a deceleration in both food and core goods inflation. Rishi Sunak, in his commitment to halve the inflation rate this year, affirmed that the government remains steadfast in its plan regardless of the forthcoming inflation report. He emphasized the progress made and expressed optimism that the plan will yield positive outcomes for people's finances as inflation recedes.
“We are making progress, the last set of numbers we had showed that inflation was falling faster than people expected. The plan is working. I think there is light at the end of the tunnel. If we get through this, people will really start to see the benefit in their bank accounts, in their pockets, as inflation starts to fall," Sunak said.
On the recent preceding, the ONS disclosed that regular pay growth, excluding bonuses, surged to a record 7.8% in comparison to the same period in the previous year, covering the quarter up to June. However, when factoring in inflation, real wages faced a decline of 0.6%. Separate data from analysts at Kantar unveiled that grocery prices moderated for the fifth consecutive month in the four weeks leading to Aug. 6. However, with a substantial year-on-year increase of 12.7%, it significantly outpaced wage inflation.
