Food prices likely to rise to fuel inflation as wage growth lags behind
GETTY - STOCK An increase in overall living costs is expected to have contributed to a rise in inflation
A rise in the overall cost of living is due to be shown in the latest round of official data, which is expected to show the Retail Price Index (RPI) hit 3.5 per cent in July, in line with the figure seen in June. Meanwhile rail passengers will discover how much more they will pay for their travel in the new year, as July's figures are used to calculate any rise.
The Consumer Price Index measure of inflation was forecast to reach 2.7 per cent last month, up from 2.6 per cent in June, according to consensus figures. Annual average weekly earnings data will be released on Wednesday and is expected to remain at 1.8 per cent for the three months to July, the same rate for the three months to June.
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Food prices have risen for seven of the last eight months - with last month being the exception Alan Clarke, the head of European fixed income strategy at Scotiabank
Alan Clarke, the head of European fixed income strategy at Scotiabank, is forecasting CPI to hit 2.8 per cent, driven in part by rising price tags on food. He said: "Food price falls came to a fairly abrupt end in the aftermath of the Brexit vote, particularly on the back of the sharp fall in the GBP exchange rate.
GETTY - STOCK The Consumer Price Index measure of inflation was forecast to reach 2.7 per cent last month
"Indeed, food prices have risen for seven of the last eight months - with last month being the exception, showing a 0.2 per cent month-on-month fall. "Overall, we view last month's downward adjustment in inflation as temporary and the peak in inflation is yet to be reached." The main downward pressure on the cost of living in June came from fuel, which saw the fourth consecutive month of falling prices, dropping 1.1 per cent month on month. Food was driving the upward pressure on everyday prices, with costs easing back by a smaller 0.3 per cent in June compared with a 0.4 per cent fall for the same month last year. Andrew Goodwin, the lead UK economist at Oxford Economics, said falling fuel prices will continue to weigh on the cost of living in July, keeping CPI at 2.6 per cent.