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What do we expect for UK inflation numbers?

20 Apr 2021 03:26 PM

UK inflation slowed in February to 0.4% compared to January in which the CPI was recorded at 0.7%, as clothing and footwear prices fell at the highest monthly pace in more than 30 years, and core inflation eased to 0.9% from 1.4%.

Usually, clothing prices rise in February after the holiday sales end, but discounts continued this year due to the continuing epidemic and the country's closure for the third month, as stores, restaurants, bars and non-essential entertainment venues have been closed since the beginning of January, and some are scheduled to reopen only in Mid-April.

Clothing and footwear prices fell 1.5% in February from January, the largest monthly drop since at least 1988 and the first since 2007.

Inflation is still below the Bank of England target of 2%, while lower inflation could be better for the consumer, and if too low it could be a sign of lower demand for goods and services among consumers and slow growth. Inflation was below the bank's target since August 2019.

The UK's consumer price index for March is expected to rise to 0.8%, and inflation is expected to continue to rise in the coming months, and may exceed the Bank of England target this year, and the main question will be, how will the central bank respond, and whether that might push it to tighten monetary policy?

The recent closures have had a clear impact on spending, as the pandemic continues to affect consumer behavior, and with increased spending after the pandemic alongside government support, it could lead to an increase in spending in the coming months.

Consumer optimism has increased in recent weeks as Prime Minister Boris Johnson has made rapid progress in his efforts to vaccinate nearly all adults by the end of June, and Treasury Secretary Rishi Sunak has helped boost sentiment by pumping a new batch of spending into his annual budget and extending the tax credit on purchases. Homes and vacation payments for those unemployed due to the virus.

The thing that may reinforce the idea of ​​continuing high inflation that is household savings reached record levels, as during the last quarter of 2020 it increased by 16.1%, and in 2020 as a whole it increased by 16.3% compared to 6.8% in 2019, which encourages increased spending. During the next period.

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