J.P. Morgan AM: UK services inflation stays sticky

J.P. Morgan AM: UK services inflation stays sticky

October 23, 2023

Inflation UK
Engelse pond.jpg

UK inflation stood still at 6.7% year-on-year in September, as slower rises in goods prices were offset by a slight pick-up in services inflation.

A key driver of services prices is labour costs; recent UK wage data showed regular pay growing at 7.8% year-on-year in August, down only 0.1 percentage points from a record high the month before. This wage growth is pushing up the cost of, for example, eating out and going away – restaurant and hotel inflation hit 8.6% year-on-year in September.

Thus, while headline inflation should fall next month thanks to supportive energy base effects, a substantial fall in services inflation seems further away. The Bank of England is therefore unlikely to be able to cut interest rates in the near term, even if the UK growth picture continues to deteriorate.

23102023 JP Morgan AM

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