By Ian McConnell
ANNUAL UK consumer prices index inflation surged from two per cent in July to 3.2% in August, its highest rate since March 2012, official figures show.
The leap partly reflected the base effect of state-funded discounts of restaurant meals in August last year during the “Eat Out to Help Out” scheme of Chancellor Rishi Sunak. August 2020 was also the first full month in which a temporary cut in VAT for hospitality was in force.
The 1.2-percentage-point, month-on-month rise in the annual CPI inflation rate in August, reported yesterday by the Office for National Statistics, was the largest since comparable records began in 1997. August’s inflation rate was above all forecasts in a poll of economists by Reuters, which gave a median prediction of 2.9%. Food prices jumped last month, amid supply-chain woe.
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Sarah Coles, analyst at stockbroker Hargreaves Lansdown, said: “Inflation has taken a breathtaking leap, surging at its fastest rate in over 20 years. It was given a significant shove by the Eat Out to Help Out scheme discounts a year earlier, which will drop out of the figures next month. However, much of this enormous jump is powered by the same alarming imbalance between supply and demand that has seen yawning gaps open up on the supermarket shelves. It spells trouble for shoppers, savers and the broader economy.”
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Martin Beck, senior economic adviser to the EY ITEM Club think-tank, said: “Factoring in the likelihood of further upward pressures on global goods prices from component shortages and supply-chain bottlenecks, the EY ITEM Club expects the CPI rate to peak in the region of 3.5% at year-end. However, the ITEM Club continues to think the rise will prove transitory.”
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