independent– As economies reopen, there are concerns that price rises could spiral as supply struggles to meet a sudden uptick in demand.
Fresh data has added fuel to these inflation worries. On Wednesday, the Office for National Statistics released figures that showed their measure of price rises, the Consumer Prices Index, rose to 2.5 per cent in the 12 months to June, up from 2.1 per cent to May.
This was a bigger leap than many economists had expected and the highest level in nearly three years. It followed data from the US on Tuesday that showed inflation at 13-year high of 5.4 per cent.
In the UK, economists were watching out for these June figures because they offer an early glimpse of reopening’s effect on inflation. The data shows snarls in supply chains, as shortages of semiconductor chips used in electronics and cars held up manufacturing, thus driving up the cost of second-hand cars. They also reveal how rising oil prices have fed through to fuel costs, and that consumers’ appetite for hotel stays and restaurant meals are also boosting inflation.
It’s a “perfect storm of different things that are pushing inflation higher” according to Andrew Goodwin, chief economist at Oxford Economics.