UK inflation has jumped to 1%, fuelled by a hike in prices at the petrol pump and struggling fashion retailers desperate to sell their goods after months of lockdown.
According to the Office of National Statistics, the consumer price index (CPI) increased 0.6% last month, from its 0.4% June rate.
Inflation has risen, in part, due to the largest monthly pump price increase in nearly a decade, as international oil prices rose from their lows earlier this year. The largest upward movement came from clothing where prices fell on the month but by less than a year ago, partly due to different sales patterns throughout the year so far.said Jonathan Athow, the deputy national statistician for economic statistics at the ONS
But a rise in services directly related to working from home and lockdown also played a part:
In addition, prices for private dental treatment, physiotherapy and haircuts increased, with the need for PPE contributing to costs for these businesses" said Mr Athow.
The consumer price index is a tool which economists use to measure the cost of living over time.
It compares the relative cost of a basket of popular goods and services over time: when the CPI goes up, it is a sign that the cost of living is on the rise.
The latest data shows that spending at restaurants and hotels also played a leading role in the month-on-month change in inflation; coinciding with the launch of the nationwide 50% off 'Eat Out to Help Out' scheme.
This upwards surge in consumer prices follows a similar revelation last month from the Retail Prices Index (RPI), another measure of inflation, which also pointed to rising prices.
The CPI and RPI are both ways for economists to represent a change in the cost of goods and services for consumers over time.
A rise or fall in the cost of living is expressed as a percentage change in the cost of the index 'basket'. For example, prices could rise by 2%, or they could fall by -2%.
These indexes are really just a way of measuring inflation. Just like the two indexes, inflation is simply a way of talking about how the cost of living changes over time.
When inflation rises, money won't go as far as it used to; and if wages don't keep up, the standard of living will eventually fall.
On the other hand, if inflation falls, people's purchasing power goes up instead.
However, most economists agree that a little bit of inflation is a good thing- and anyone looking to invest in assets may well agree with them.
This is because, when inflation gets very low, people are inclined to save their' spare money'. This reduces the rate of spending in the wider economy, which slows down economic growth.
As a result, most governments around the world have target inflation rates somewhere close to 2.5%.
These slightly higher rates of inflation can be great news for people who hold their wealth in assets because as inflation rises, the cash value of their assets increases.
For cash savers, however, it's a different story: as inflation rises, their savings become worthless, because they won't stretch as far as they used to.
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