UK inflation rises as game console prices increase in lockdown
UK inflation has risen for the first time this year, fuelled by the rising price of games consoles during lockdown and a lack of summer sales on the high street.
The Office for National Statistics said the consumer price index (CPI) measure of inflation increased slightly to 0.6% in June from 0.5% in May. City economists had expected the inflation rate to remain the same against a backdrop of weak consumer demand.
Because of the impact of the coronavirus crisis, the ONS said clothing prices had not followed the standard seasonal pattern this year, with the usual summer sales price cuts failing to materialise as much of the high street was closed. Prices for computer games and consoles increased but food prices, particularly vegetables, fell.
Economists said the increase in June was not the start of a sustained rise for inflation, with the CPI index remaining at the lowest levels in four years and far below the 2% target set by the government for the Bank of England to achieve.
Debapratim De, a senior economist at the accountancy firm Deloitte, said: “June’s inflation figures are slightly above expectations but there remains abundant spare capacity in the economy. This should maintain a downward pressure on inflation, which could fall further, especially if there is a spike in unemployment later this year.”
Inflation has been driven down during the Covid-19 crisis by a falling global oil price and fading demand for goods and services as businesses temporarily ceased trading and furloughed millions of workers. Although the oil price has risen again in recent months and shops, restaurants and pubs have begun to reopen, a sharp rise in the cost of living is not expected.
Paul Dales, the chief UK economist at the consultancy Capital Economics, said: “We suspect that after the initial release of pent-up demand once non-essential retailers opened in mid-June, retailers will have to use heavier discounts to get people through the doors.”