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13 September 2016

Inflation rate steady at 0.6 per cent in August

UK inflation (CPI) held at 0.6 per cent for August, which was slightly lower than expectations of a 0.7 per cent rise in inflation.

Core inflation, which strips out energy and food also held steady at 1.3 per cent, the Office for National Statistics (ONS) said.  Within the underlying numbers, August saw fuel costs level out but food and air fares rose. Offsetting these factors were falls in hotel, wine and clothing costs.

James Andrews, Head of Investment Management at investment management and stockbroking firm Redmayne-Bentley, said: “It’s interesting to see that whilst the fall in the Pound has led to higher raw material costs, these are have either been mitigated by hedging/forward contracts that companies have in place or companies have just felt unable to pass price rises on to consumers at the current time. This is in contrast to the headlines we saw around the 10 per cent increase in the UK price of Apple’s products post the Pound’s fall, and it goes to show that not too many firms feel they have the pricing power (ability to raise prices) that Apple have. This is likely to have a negative impact on profit margins if companies continue to wear these increases in costs and not pass them on to customers, and it is expected that prices will eventually creep up to help profitability and thus bring inflation with them. We will be watching next month’s numbers with interest.”

Inflation rate steady at 0.6 per cent in August
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