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Coronavirus: UK inflation rose in June as businesses emerged from lockdown

Edmund Heaphy
·Finance and news reporter
·3-min read
Bus Moving On Road Against Sky In City
The Bank of England is being 'especially vigilant' in its monitoring of inflation expectations. (Getty)

Rising prices for games, toys, and hobbies unexpectedly pushed the UK inflation rate higher to 0.6% in June, as businesses across the UK emerged from the country’s sweeping coronavirus lockdown.

The year-on-year growth in prices, up from 0.5% in May, came in spite of falling food prices, according to the Office for National Statistics (ONS).

The coronavirus pandemic is widely expected to lead to a deep slowdown in the UK economy, and growth in consumer prices had been expected to slow further in the short term as a result.

Analysts had forecast that the rate of inflation would fall to 0.4% in the month.

“The inflation rate has increased for the first time this year, but remains low by historical standards,” said Jonathan Athow, an ONS statistician, who noted that seasonal price patterns had been disrupted by the pandemic.

READ MORE: UK economy shrinks by one-fifth under coronavirus lockdown

Meanwhile, the usually less volatile measure of core inflation — which excludes energy, food, alcohol, and tobacco prices — climbed to 1.4% in June.

The largest upward contribution to price growth between May and June came from recreation and culture, where prices overall rose by 0.2%.

Within that broad category, prices for games, toys, and hobbies — and particularly computer games and computer games consoles — rose sharply in the month.

There was also a large upward contribution from the clothing and footwear category, with prices falling very slightly between May and June, compared to a larger fall between the same months in 2019.

Prices for food and non-alcoholic beverages, meanwhile, fell by 0.6% in the month, with vegetables — and particularly premium potato crisps — seeing the biggest decline.

Due to the coronavirus pandemic, the ONS said that there were still 67 unavailable items in the basket of goods it uses to calculate inflation in June, down from 74 in May and 90 in April.

Using an alternative basket of goods, which excludes unavailable items such as a restaurant cup of coffee and a draught pint of lager, inflation would have been 0.4% in June.

Some analysts have suggested that the unprecedented stimulus measures launched in the UK may eventually lead to runaway inflation.

But the country experienced a decade of low inflation following the 2008 financial crisis even after the Bank of England slashed interest rates and launched a sweeping asset-purchasing programme.

READ MORE: UK faces worst economic downturn in 300 years

Price stability is one of the core mandates of the bank, which has a 2% inflation target.

Bank of England chief economist Andy Haldane said last month that the central bank’s Monetary Policy Committee was being “especially vigilant” in its monitoring of inflation expectations, noting that “strong forces” were acting on consumer prices.

Arguing that the UK economic recovery had come “sooner and faster” than any mainstream forecasters had predicted, Haldane suggested that a rapid rebound could push up inflation and prompt the bank to increase interest rates.

But meagre economic growth in May has since dented optimism about a so-called V-shaped recovery.