Europe, UK (Commonwealth Union) – In the latest data released by the Office for National Statistics (ONS), the Consumer Prices Index including owner occupiers’ housing costs (CPIH) has shown a significant increase of 3.1 percent in the 12 months to July 2024, up from 2.8 percent in June 2024. This rise in the rate of inflation can be attributed to various factors, including changes in the housing and household services sector.
Inflation is a crucial economic phenomenon that affects the purchasing power of individuals and the overall health of an economy. In simple terms, it refers to the steady increase in the general price level of goods and services in an economy over time. This rise in prices leads to a decline in the purchasing power of money, as each unit of currency buys fewer goods and services than before.
The UK economy was hardest hit in recent times with the pandemic which had a global impact. A key area of focus for this recent rise in inflation may come to the Demand-Pull inflation which is a type of inflation occurs when the demand for goods and services in an economy outpaces the supply. As a result, businesses raise their prices to meet the increased demand, leading to a general increase in the price level. Causes of demand-pull inflation include increased government spending, tax cuts, and a growing population.
Another area economist may focus on is the Cost-Push inflation which is a type of inflation is caused by increases in the cost of production, such as higher wages, increased raw material prices, or higher taxes. As costs rise, businesses pass these increases on to consumers in the form of higher prices, leading to inflation.
According to the ONS The primary factors influencing the annual inflation rate for both CPIH and CPI are identical where the two measures overlap. However, the OOH component, which constitutes around 16% of the CPIH, is the key factor causing variations between the CPIH and CPI inflation rates.
Economists are likely to contrast UK’s inflation to the global inflation rate forecast with more global inflation data when looking into world inflation rates.
