The UK Consumer Price Index jumped to 1% in July from 0.6% a month earlier as the price of clothing, fuel and household goods moved higher, figures published by the Office of National Statistics (ONS) today (19 August) show.
Despite the Bank of England's (BoE) prediction earlier this year that inflation could fall to near 0% as a result of the pandemic, the 12-month rate for CPI including owner occupiers' housing costs (CPIH) was 1.1% in July 2020, up from 0.8% in June 2020.
However, the rate still remains well off the BoE's inflation target of 2%.
With the UK now in a recession, August’s figures may be more telling of long-term inflationary moves and the Bank of England has forecast another dip in the rate."
Notably, the easing of lockdown restrictions has seen the number of CPIH items that were unavailable to UK consumers fell from 62 in June to 12 items in July.
Ed Monk, associate director for Personal Investing at Fidelity International, said the increase in CPI and products available to consumers shows that "economic life is getting back to normal."
He added: "While inflation appears to be creeping higher after a fall in the early months of lockdown, price rises remain way off the Bank's 2% target and likely to stay this way some time even in the face of significant government stimulus."
"With the UK now in a recession, August's figures may be more telling of long-term inflationary moves and the Bank of England has forecast another dip in the rate."
"Looking forward, there is the possibility of negative inflation, or record lows, as VAT cuts and Rishi's ‘eat out to help out' scheme distorts actual consumer spending levels. On the other hand, the Government's increased budget deficit could lay the foundations for increasing inflation in the coming months."
"A potentially worrying sign with consumer confidence still struggling and wage growth negative."
"With inflation prospects looking uncertain, investors should ensure they are holding a well-diversified portfolio which is balanced to make any further volatility work in their favour."