Good morning and welcome to our ongoing coverage of the global economy, financial markets, euro area and business.
The news has just come out: UK inflation rose to 3.2% in August, from 2% in July, the highest rate since March 2012. The National Statistics Bureau says:
The 1.2 percentage point increase is the largest increase ever recorded in the twelve-month inflation series in the national CPI statistics, which began in January 1997; This is likely to be a temporary change.
The consumer price index rose 0.7% between July and August, compared with a 0.4% decline in August last year.
According to the statistics office, higher prices in traffic, in restaurants, hotels and for food and beverages drove up the consumer price index. It noted that in August 2020, many restaurants and cafes were reduced in prices due to the government’s temporary Eat Out to Help Out program, which was not repeated this year.
BIG jump in UK CPI inflation.
Increase from an annual rate of 2% in July to 3.2% in August.
This is not only the highest inflation rate since 2012, but also the largest monthly change in the history of this measure of inflation (since 1997) pic.twitter.com/vpayK1ziq7
September 15, 2021
Another surge in inflation – @ONS data shows that #inflation in the UK rose to 3.2% from August 21st, the highest rate since March 2012.
Sharp increase mainly due to large base effects from last year’s sales tax cut and eating out to cut restaurant prices on August 20th, while prices have increased this year. pic.twitter.com/nKrDDnh0RW
September 15, 2021
The numbers come a day after inflation across the US economy eased in August from 13-year highs in July, suggesting that some of the pandemic price pressures may ease.
The US consumer price index rose 5.3% in the twelve months to August compared with 5.4% in July. Energy prices rose by 25% over the course of the year, while the food index rose by 3.7%. Core inflation, which excludes volatile items such as energy and food, fell from 4.5% to 4%.
Even if investors wanted to, equity markets still fell and bond yields fell on concerns that growth may slow.
In China, retail sales fell sharply, showing the impact of port disruptions and localized Covid restrictions reintroduced due to the proliferation of the Delta variant. Retail sales rose 2.5% in August, a sharp drop from the 8.5% increase in July. Industrial production also slowed from 6.4% in July to 5.3%. Asian markets fell on the data, with the Japanese Nikkei down 0.5% and the Chinese CSI 300 down 1%.
Michael Hewson, Chief Market Analyst at CMC Markets UK, says:
If investors weren’t worried about a slowdown in the Chinese economy before today’s numbers, they probably are now. As a measure of how much damage the resurgent delta variant of economic activity is causing, one couldn’t think of a more blatant example.
- 7.45 a.m. BST: France inflation final for August (forecast: 1.9%)
- 9:00 a.m. BST: Italy inflation final for August (forecast: 2.1%)
- 10 a.m. BST: Eurozone industrial production for July
- 12 noon BST: US MBA mortgage applications for the week of September 10th
- 1:30 p.m. BST: Canada inflation for August (Forecast: 3.9%)
- 2:15 p.m. BST: U.S. industrial production for August