UK Inflation Dips in June: Brief Relief for Burnham's New Government?
UK Inflation Dips in June: Brief Relief for Burnham's New Government?
Good news for Andy Burnham as UK inflation dips to 2.4% in June, thanks to falling fuel prices! But don't get too comfortable, energy bills are up, and economists warn of a 'bumpy path' ahead. Get the full scoop!
The UK is seeing a glimmer of economic respite as inflation is predicted to have slowed last month, a timely boost for Andy Burnham’s incoming government. Official figures for June’s Consumer Prices Index (CPI), expected this Wednesday, are anticipated to show a drop to 2.4 per cent, down from 2.6 per cent in May.
Economists are largely attributing this welcome slowdown to a significant decline in petrol and diesel costs. According to the RAC, the average price of a litre of diesel at UK forecourts saw its largest monthly decrease since records began in 2000, falling by over 16p. This was reportedly driven by news of an interim ceasefire deal between the US and Iran, which caused oil prices to fall below pre-crisis levels and stabilise after a period of volatility.
Beyond fuel, economists also expect a slowdown in inflation across the UK’s services industry, though popular live music events like Harry Styles and Take That concerts might have kept prices buoyant in some areas. Household energy inflation is also thought to have moderated slightly in June.
However, this relief is widely viewed as temporary. The new Ofgem energy price cap, which took effect at the beginning of July, has already seen the typical household’s gas and electricity bill climb by 13 per cent. This translates to an increase of £221, pushing the annual bill to £1,862.
Adding to future concerns, tensions in the Middle East have reignited, causing Brent crude oil prices to rise again throughout July. Sanjay Raja, chief UK economist for Deutsche Bank, warned of a “bumpy path” ahead. He highlighted the ongoing uncertainty in the energy disinflation path and cautioned that the “spectre of food price rises remain stark,” even as current oil prices are below the peak seen during the height of the Iran conflict. This suggests that while June offered a brief pause, the broader economic challenges for the new administration are far from over.
