SerpApi.Org
Falling inflation is a “false dawn” for Andy Burnham, economists warned after the pace of price rises slowed in June.
The consumer prices index (CPI) fell from 2.8pc in May to 2.6pc last month, according to the Office for National Statistics (ONS), beating economists’ expectations of a drop to 2.7pc to mark the lowest rate in 15 months.
Lower petrol and diesel prices drove the slowdown amid a short-lived peace deal between the US and Iran, while price pressures from chocolate, oils and fats, dairy and meat also weakened.
However, economists warned a rise in household energy bills in July may already have pushed inflation back up above 3pc.
Suren Thiru, chief economist at the Institute of Chartered Accountants, said: “June’s slowdown is a false dawn as it may have already been reversed this month with higher energy bills, following Ofgem’s energy price cap rise, likely to have lifted inflation above 3pc.”
July’s 13pc increase in the energy price cap has pushed typical annual bills to around £1,862, while renewed fighting between the US and Iran has reignited concerns over oil and gas supplies.
Mr Thiru said elevated inflation would create a fresh headache for John Healey, the newly appointed Chancellor, by squeezing household budgets, raising government borrowing costs and limiting his room for tax cuts or spending increases.
Charlotte O’Leary, at the National Institute of Economic and Social Research, said: “June’s peace deal and the subsequent reduction in oil and gas prices helped cool consumer price inflation. This will be a welcome figure to start the new Prime Minister’s premiership, but the honeymoon period will be short-lived.”
The Bank of England will also be watching closely as it weighs further interest rate cuts, though economists warned renewed instability in the Middle East and higher energy bills could keep inflation close to 3pc for the rest of the year.
Mr Healey said: “Falling inflation is news families want to hear, but there is much more to do to give people the breathing space they need.”
Signing off...
Thank you for following our coverage of today’s inflation figures, as economists warned new Prime Minister Andy Burnham that his economic “honeymoon” will be short-lived.
While the consumer prices index (CPI) fell from 2.8pc in May to 2.6pc last month, marginally ahead of analyst expectations, an impending rise in household energy bills threatens to drive prices back up next month.
Renewed hostilities in the Middle East have already sent oil prices surging. Brent crude, the international benchmark, was trading at more than $95 a barrel on Tuesday morning – roughly a 30pc rise compared to a month ago.
The energy price cap, set by the regulator Ofgem, rose 13pc in July, putting a typical household’s annual bill at £1,862. Economists have warned that this could push inflation back above 3pc, potentially wiping out any savings from Mr Burnham’s plans to remove VAT from electricity bills.
Be sure to read my colleague Eir Nolsøe’s analysis of what the next few months holds for Mr Burnham’s ambitions to ease the cost of living.
Wetherspoon issues fourth profit warning this year after Labour tax raid
JD Wetherspoon has issued its fourth profit warning this year as it battles soaring costs caused by Labour’s tax raid.
Shares in the pub chain fell by as much as 9pc in the wake of Wednesday’s update, as Sir Tim Martin, the chairman, admitted that performance was “likely to be below market expectations”.
The pub group, which operates around 800 pubs and employs about 42,000 people, has repeatedly warned that the impact of high taxes and inflated energy costs were overwhelming resilient customer demand.
Oil surges above $95 as Trump tensions rise
Oil prices have surged above $95 a barrel, extending this month’s rally to around 30pc as hopes of talks between the US and Iran faded and concerns over global supplies grew.
Brent crude has climbed back to levels last seen before a short-lived ceasefire, after Tehran said there were currently no negotiations taking place.
The move higher came after Donald Trump said Iran “want to desperately meet” but that the US had “no interest” in talks, comments that were rejected by Tehran.
The US has continued strikes on Iran for an 11th straight day, while tensions have also risen around shipping routes after threats from Houthi rebels in Yemen.
Three tankers have been attacked near the Strait of Hormuz in recent days, adding to fears of further disruption.
World Cup fans sink 314m pints as supermarkets score summer boost
England’s World Cup run and back-to-back heatwaves gave supermarkets a summer lift, with shoppers buying the equivalent of 314m pints of lager over the past four weeks.
Lager sales jumped 12.9pc year-on-year, with 178.7m litres sold as fans stocked up for match-day gatherings, according to NielsenIQ.
The tournament also drove a broader shift towards drinks suited to socialising at home. Mixed alcoholic drinks saw the biggest rise, with value sales up 31.1pc and volumes climbing 22.6pc.
No and low-alcohol drinks continued to gain ground, with value sales up 17.9pc and volumes rising 20.8pc.
Soft drinks were another bright spot, with sales up 10.6pc, driven by energy drinks, which rose 11.8pc, and ready-to-drink coffee, up 10.2pc.
Rapid grocery delivery reached its highest share of online supermarket sales this year on the day of England’s quarter-final, accounting for 14pc of online purchases as fans made last-minute orders.
The boost came against a tougher backdrop, with two-thirds of shoppers saying the cost-of-living squeeze was still affecting their spending.
Readers have their say
Telegraph readers have weighed in on today’s inflation figures. Have your say in the comment section below.
House prices rise but Labour’s stamp duty raid hits growth
House prices continued to climb in May, but growth slowed sharply after Labour’s stamp duty changes pushed up the cost of buying a home for thousands of buyers.
The average UK house price rose 2.7pc in the year to May, down from 3.9pc in April, according to the latest UK House Price Index from the Office for National Statistics and HM Land Registry.
The average property cost £271,000, up £7,000 compared with a year earlier.
The slowdown was driven by a “base effect” from changes to stamp duty introduced by Rachel Reeves in her first Budget. From 1 April 2025, the threshold at which first-time buyers began paying stamp duty was cut from £425,000 to £300,000, while the nil-rate band for other buyers was reduced from £250,000 to £125,000.
Prices rose by 2.3pc in England, 4.2pc in Wales and 4.4pc in Scotland over the year. London remained the weakest market, with prices falling 3.7pc to an average of £545,000.
It brought forward a rush of purchases before they came into force, boosting house price growth a year earlier and making annual comparisons look weaker this May.
The figures come as the housing market shows signs of stabilising after a difficult period for buyers facing high borrowing costs.
However, mortgage approvals fell to 56,200 in May, below the six-month average of 63,300, according to the Bank of England.
The Royal Institution of Chartered Surveyors said sales activity remained “clearly negative”, although some measures were showing signs of improvement.
Detached homes recorded the strongest price growth, rising 3.1pc over the year, while flats continued to struggle, with prices down 1.3pc.
Rolls-Royce issues Burnham ultimatum over £3bn jet engine project
Rolls-Royce has warned Andy Burnham that his Government must back a £3bn plan for new short-haul jet engines or put 40,000 UK jobs at risk.
Tufan Erginbilgic, the company’s chief executive, said on Tuesday that Labour should pledge financial support to help Rolls-Royce build engines for the next generation of jets being developed by Airbus and Boeing or risk it moving production abroad.
The Rolls-Royce engine programme would create 40,000 jobs, among the best-paid manufacturing roles in Britain, he said.
But while Rolls-Royce wanted to build the new engines in Britain, Mr Erginbilgic said it was also exploring funding agreements with foreign governments that could see the company produce overseas.
VAT cut on energy bills is ‘socially inefficient’, economist warns
Andy Burnham’s VAT giveaway on household electricity bills could increase energy use and undermine net zero goals, an economist has warned.
Dr Peter Bird, a PhD economist at consultancy BRG, said scrapping the 5pc tax would be “socially inefficient” because the biggest gains would go to people in larger homes, who typically consume far more electricity than poorer households.
He warned the policy would also weaken incentives to cut energy use and do nothing to support businesses facing high power costs, because companies do not pay VAT on electricity.
Mr Bird said: “An alternative would be a flat rate rebate for each household, channelled through electricity suppliers. This would be fairer and would remove the perverse incentive to use more electricity.”
He said the Government’s approach risked prioritising a short-term boost for households over longer-term costs, adding that a rebate could prove cheaper for the Treasury and allow savings to be used to help industry.
Oil surges to $93 as US-Iran hostilities continue
Oil prices climbed more than 4pc on Wednesday as renewed fighting between the US and Iran raised fresh concerns over global energy supplies.
Brent crude rose above $93 a barrel, extending gains for a fourth consecutive session after President Donald Trump played down the prospect of talks with Tehran and threatened further military action.
The US military also carried out an 11th straight day of strikes on Iran, while warning that shipping through the Strait of Hormuz remains at risk.
The surge in oil prices has fuelled fears that inflation could rebound in the coming months, undermining hopes that June’s slowdown will be sustained.
In charts: Inflation at its lowest point in 15 months
UK inflation eased to 2.6pc in June, down from 2.8pc in May and marking its lowest level this year.
The slowdown was helped by falling clothing prices, as summer sales and heavier discounting pulled down the cost of fashion items.
Retailers cut prices to tempt shoppers during June heatwave
Summer discounts from fashion retailers helped push UK inflation lower in June, as stores cut prices to tempt cautious shoppers.
The Office for National Statistics said clothing and footwear prices fell 1.2pc on the month, compared with a 0.4pc drop a year earlier, as a larger share of items were sold at reduced prices.
The sharper seasonal markdowns helped pull CPI down from 2.8pc in May to 2.6pc in June, alongside falling motor fuel prices.
The move comes as retailers face a tougher battle for customers. Footfall data from MRI Software showed high street visits fell 3.3pc year-on-year in June, despite major sporting events and warmer weather, while retail parks proved more resilient.
The figures suggest retailers are leaning harder on promotions to keep shoppers spending, offering some relief for households but squeezing margins across the sector.
Energy bills threaten to reignite inflation
The fall in inflation may prove temporary, with higher energy bills expected to push prices higher again and pile pressure on the new Chancellor.
Suren Thiru, chief economist at the Institute of Chartered Accountants, said June’s slowdown could prove a “false dawn” after the 13pc rise in the energy price cap at the start of July.
The cap increased to around £1,862 a year for a typical household, with economists warning that renewed pressure from energy and commodity prices could push inflation back above 3pc later this year.
Mr Thiru said: “Though stubborn services and core inflation suggest that the UK remains exposed to the inflationary fallout from the Iran war, weaker wage growth and a sluggish economy will help blunt any second-round effects.”
He added that elevated inflation would become a bigger headache for the Chancellor by squeezing household budgets, increasing borrowing costs and limiting fiscal room.
Food inflation hits two-year low
Food price inflation has slowed to its lowest level in almost two years, as supermarkets competed to attract shoppers during the recent warm spell, according to industry groups.
The British Retail Consortium said the fall in food prices was driven by intense competition between retailers, despite ongoing pressures across supply chains.
Harvir Dhillon, economist at the BRC, said: “The drop in both headline and food inflation is good news for households, who are benefitting from summer deals.”
However, he warned retailers remained under pressure from higher National Insurance costs, packaging taxes and rising input costs.
The Food and Drink Federation said manufacturers had “worked hard to diversify supply chains and build resilience” since the invasion of Ukraine, but warned disruption remained a challenge and food price pressures could build again later this year.
Burnham’s ‘inflation honeymoon’ will be short-lived, economists warn
The surprise drop in inflation in June will prove short-lived after Donald Trump’s war in Iran resumed, economists have warned.
A couple of weeks ago, economists had started to regain hopes that the Bank of England could perhaps cut rates after all this year.
Such optimism has, however, quickly evaporated after the US and Iran have returned to hostilities in a conflict that is proving difficult for the American President to exit.
Charlotte O’Leary at the National Institute of Economic and Social Research said: “June’s peace deal and the subsequent reduction in oil and gas prices helped cool consumer price inflation. This will be a welcome figure to start the new Prime Minister’s premiership, but the honeymoon period will be short-lived.”
This was echoed by Martin Beck, chief economist at WPI Strategy.
He warned: “Inflation is likely to rise again over the next few months as earlier increases in oil and gas prices work their way through the economy and July’s 13pc rise in the household energy price cap takes effect.
“Renewed instability in the Middle East means consumer price inflation may now remain close to 3pc for the rest of the year. But the outlook is unusually hostage to events overseas”.
What happened overnight
Asian markets pushed higher on Wednesday, led by a rebound in technology stocks, even as geopolitical tensions in the Middle East kept investors on edge.
Brent crude climbed above $90 a barrel, extending recent gains as fears of supply disruption intensified amid ongoing US-Iran strikes and threats to key shipping routes.
Despite the tensions, stocks rose, led by a rebound in chipmakers after a recent sell-off.
The MSCI Asia Pacific index rose about 1pc. South Korea’s Kospi jumped roughly 3pc and Taiwan’s Taiex gained around 2pc, both lifted by strong moves in semiconductor stocks. Japan’s Nikkei 225 climbed about 1.5pc, supported by technology names.
In China, mainland markets edged up by around 0.5pc, while Hong Kong’s Hang Seng added close to 1pc.
On Wall Street, stocks closed higher overnight, with the S&P 500 rising 0.6pc, the Dow Jones up 0.4pc and the Nasdaq gaining 0.8pc as investors rotated back into technology shares.
Good morning
Thanks for joining me.
5 things to start your day
1) The race to build Britain a fighter jet that could take on Putin | The UK, Italy and Japan are working together to build an aircraft of the future: Tempest
2) OpenAI admits rogue bot escaped the lab and hacked rival | ‘Unprecedented’ incident will revive concerns new tools could be repurposed for unstoppable cyber attacks
3) Beware the rising energy dangers of Trump’s Gulf war | The whole global market is seizing up, threatening all of Andy Burnham’s plans
4) We won’t be hoodwinked on defence borrowing, City warns Healey | Bond traders urge new Chancellor to cut back on welfare spending to fund the Armed Forces
5) Rolls-Royce issues Burnham ultimatum over £3bn jet engine project | Chief executive warns Labour to pledge funding or risk aerospace giant moving production abroad
