CPI inflation rises for first time in 2020

Consumer price inflation increased to a 12-month rate of 0.6% in June, up from 0.5% in May, according to the latest Consumer Prices Index (CPI) from the Office for National Statistics (ONS).

The ONS revealed that the CPI which includes owner occupiers' housing costs (CPIH) 12-month inflation rate was 0.8% in June, up from 0.7% in May 2020.

The data also showed the one-month inflation rates for both CPIH and CPI from the ONS climbed to 0.1% in June, compared with 0.0% in June 2019.

The largest contribution to the CPIH 12-month inflation rate during June came from recreation and culture (0.32 percentage points), and the ONS stated that rising prices for games and clothing resulted in the largest upward contributions to the change in the CPIH 12-month inflation rate between May and June.

Killik & Co associate investment director, Rachel Winter, commented: “June is the first month of 2020 where we have seen the impact of lockdown easing on the inflation rate. Non-essential shops were starting to open, people began heading back to work and the hospitality industry prepared to reopen. While it still sits well below the government’s 2% target, it does point towards a continued upward trend – even if slight. 

“Even with Rishi Sunak’s incentives, lockdown will have undeniably changed the spending attitudes of many and it will be a while before people are as willing to dig deep in their purses. This data is one to watch, as the detail behind the inflation figures tells us more about which sectors are the winners and losers of the COVID-19 fallout.”

AJ Bell personal finance analyst at investment platform, Laura Suter, added: “The inflation rise in June doesn’t necessarily mean that it’s only going to head upwards this year. As we see the effects of lockdown easing further we’d expect to see some increases in prices.

“But everyone from the Bank of England to the Office for Budget Responsibility expects inflation to fall further this year, before rebounding slightly next year.

“Some doubt has been cast over how accurate the ONS’s inflation figures are, as it still can only collect prices for 85% of the items in its virtual basket. A number of leading research groups think inflation is actually running much higher than the official figure, as what we’re all spending our money on has changed dramatically.”

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