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PwC comments on June's inflation data

14/07/21

Hannah Audino, economist at PwC comments on today's inflation data:

“Inflation continues to exceed expectations, jumping up again in June 2021 to 2.5%, from 2.1% in May. There was widespread growth in consumer prices across the ONS’ basket of goods and services, with only health seeing a fall in prices.

“The latest rise in the 12 month rate reflects a number of trends influencing consumer prices:

  • The easing of COVID-19 restrictions with the reopening of indoor hospitality, as reflected in rising prices of restaurants and hotels
  • The impact of global supply shortages due to the pandemic - for example, in semiconductor chips - is causing consumers to turn to the second hand car market and driving up prices
  • The impact of base effects, as a result of the low prices (i.e. for petrol) that we saw a year ago during the pandemic.

“Inflation is unlikely to follow a smooth path this year, with different factors feeding irregularly into the monthly data. In general, inflation is expected to follow an upwards trend as the economy reopens, allowing consumers to unleash some of their estimated £180bn of excess savings. We might see businesses raising prices in order to recoup lost revenues and also in response to rising input costs such as freight and raw materials”.

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