Money blog: Inflation rises for first time since last year (2024)

There's a key figure in the latest statistics that commuters should watch out for, says business correspondent Paul Kelso.

The Retail Prices Index (RPI) - the figure typically used to determine rail fares - stood at 3.6% in the 12 months to July.

Kelso says the use of RPI to determine fare rises in January is "not a hard and fast rule" and the Department for Transport has not yet revealed whether it will be used to determine how much commuters will pay for season tickets.

The 2023 rise was based on the UK's average earnings growth during the three months to July 2022, while a figure of 4.9% - not thought to be linked to any specific economic measure - was used for 2024.

"By January, Labour wants to have transformed the way the railway network runs - but that's one to perhaps put in your diary," he says.

Separately, Kelso notes that US inflation data comes at 1.30pm today - which will "probably have more impact on the wider economic global economy" than today's 2.2% inflation figure.

On the inflation rise generally, Kelso says it's unlikely there will be any "panic".

"But it just goes to show, as the Bank of England has been saying for quite a long time, we're not out of the woods on the inflation rate," he adds.

Those who follow inflation data each month will know that, beyond the headline figure, the core inflation number is key - as it excludes volatile elements such as fuel and food, and therefore provides a clearer picture of what's going on underneath the bonnet of the UK economy.

July's data shows core inflation fell from 3.5% in June to 3.3%.

Meanwhile, services inflation is being closely monitored by the Bank of England as it is made up in large part of wages.

Concern over wage growth is one factor eliciting caution from the Bank of England in easing high interest rates.

Today's data shows services inflation has fallen - from 5.7% to 5.2%.

Beyond the headline figure, these would appear to be encouraging signs - although goods deflation, which saw prices fall, has eased.

Chief secretary to the Treasury Darren Jones has provided the first government reaction to the latest inflation figures.

"The new government is under no illusion as to the scale of the challenge we have inherited, with many families still struggling with the cost of living," he said.

"That is why we are taking the tough decisions now to fix the foundations of our economy so we can rebuild Britain and make every part of the country better off."

Falling energy prices have fed into lower inflation in recent months - and those impacts fading away means there's been less downward pressure on inflation.

The Office for National Statistics has said: "The largest upward contribution to the monthly change in both CPIH and CPI [inflation] annual rates came from housing and household services where prices of gas and electricity fell by less than they did last year; the largest downward contribution came from restaurants and hotels, where prices of hotels fell this year having risen last year."

Inflation rose above target to 2.2% in July, official data shows.

The rise from target 2% is the first upward movement since December.

Economists polled by Reuters had forecast a rise to 2.3%.

Today's figure, though back above target, remains significantly lower than highs seen over the last few years - with a peak in October 2022 of 11.1%.

We'll be digging deeper into the figures over the coming minutes and hours - so don't go anywhere.

What could rising inflation mean for interest rates?

Inflation rising again illustrates the dilemma facing the Bank of England in deciding how quickly to cut interest rates.

The Bank has elevated the base rate to restrict spending and keep inflation at bay.

Susannah Streeter, head of money and markets at investment platform Hargreaves Lansdown, said high wage growth (latest data shows this is at 5.4%) remained a "lingering concern" for Bank rate setters.

"The belt to constrain growth is likely to stay in place in September, because some policymakers are still worried about the potential for wage growth to bulge again," she said.

"They're concerned that if it's not held back, it could prompt inflation to run away again if firms pass on higher wage costs to prices charged to customers."

After a first base rate cut to 5% in August, the Bank suggested rates would not fall as quickly as they rose from the beginning of 2022 until August last year.

Ahead of today's inflation data, markets were pricing in a base rate hold in September, followed by consecutive cuts in November and December.

That would leave the base rate at 4.5% at the end of the year.

"The resurgence in headline inflation in the second half of the year will create a challenging backdrop for the BOE," said Dan Hanson, chief UK economist at Bloomberg Economics.

"While the rise can be easily explained by base effects associated with energy prices, the optics of easing policy when inflation is on the rise aren't favourable."

Basically, inflation is the rate at which prices are rising.

It directly affects our overall cost of living and, if wages are not increasing at the same pace, the value of your money decreases.

It is impacted by lots of different factors including global conflicts - with the Ukraine war having a huge impact on food and gas prices in recent years. Some argue Brexit also had a negative impact.

In the UK, inflation is measured monthly - comparing how much prices are going up with the same time a year previous.

The headline inflation figure, which you'll see a lot in the news, measures price rises across a range of products that we need in our daily lives.

The most commonly used inflation index is the Consumer Price Index (this is the update at 7am today) - and the target for many Western governments is 2%.

One thing to note is that falling inflation doesn't mean prices are coming down - just that they're rising less quickly. You'd need a minus figure, or negative inflation, to see prices fall overall.

Why does inflation impact interest rates?

The Bank of England raises interest rates to try to slow spending and encourage saving - when this happens prices/inflation tend to come down.

When inflation falls, interest rates tend to.

Potential winners and losers from high inflation

Overall, a high and volatile rate of inflation is widely considered to be damaging for the economy – but there are some people who could benefit from it.

Workers with wage bargaining power (perhaps those who belong to strong trade unions) can come off better as they can protect their incomes by bidding for higher wages.

Producers could end up benefitting if their prices rise quicker than their costs.

People with stocks or property could also see the value of their assets rise if there is a sustained period of price inflation.

However, retired people on fixed incomes are likely to be worse off as inflation cuts the real value of their pensions and other savings.

The poorest members of the population will also feel the pinch more as costs of borrowing, food and domestic utilities are high.

Ofgem has given the green light to a £3.4bn project to build an electricity "super highway" between Scotland and England.

Eastern Green Link 2 - a joint programme between Scottish and Southern Electricity Networks and National Grid - would stretch for 500km (311 miles) from Aberdeenshire to North Yorkshire, transporting major quantities of renewable energy.

It marks the biggest single investment in electricity infrastructure in Britain and is part of a drive to modernise the grid.

Jonathan Brearley, Ofgem chief executive, said the energy regulator was "fully committed to supporting the government to meet its aims of getting clean power by 2030".

"Today's announcement is a further step in putting the regulatory systems and processes in place to speed up network regulation to achieve its aim," he said.

Read the full story here...

Amazon has launched its own credit card that gives 1% back on all purchases through the site.

Partnering up with Barclaycard, the online giant's card gives customers 0.5% back on transactions made elsewhere - this will drop to 0.25% after the first year.

This does not include gambling transactions, cash withdrawals, balance transfers, buying currency or money transfers.

Amazon Prime members also get 2% back from all spending with Amazon during designated shopping event days, including Cyber Monday, Black Friday, and Prime Day.

Those who are approved for the account will get a £20 Amazon gift card as well.

Cardholders will have access to Barclaycard's entertainment perks, including advance pre-sales for selected UK events, and 10% off pre-sale tickets when they use their Amazon Barclaycard to pay.

It comes with 0% APR on all purchases for the first six months.

After this, the card has a representative APR of 28.9%, with lending and rate subject to customers' financial circ*mstances and borrowing history.

At the moment, it is only available to new Barclaycard customers, with existing account holders unable to switch.

However, Barclays and Amazon are aiming to open applications for existing Barclaycard customers in the coming months.

"We're excited to introduce the Amazon Barclaycard - designed to offer cardmembers ways to earn rewards for their Amazon purchases and every day activities with no annual fee,"said John Boumphrey, Amazon UK country manager.

"Delivering value to our customers is incredibly important to us, so we're delighted to introduce a new payment option that allows customers to save and earn on Amazon."

This is an abridged version of Ian's full analysis, which you can readhere

Asda looks to be in a very bad way.

Its market share has fallen to 12.6%, down from 13.7% a year ago, which is an astonishing fall from grace.

What happened?

In short, a great deal of upheaval.

In October 2020, while the pandemic was still raging, Walmartsold a majority stake in Asdato the private equity company TDR Capital and to brothers Mohsin and Zuber Issa.

With Walmart maintaining a strategic 10% stake in Asda, allowing the retailer access to its buying power, there was initial optimism.

But the financial engineering that underpinned the deal - the buyers raised £2.75bn towards the purchase by selling a bond secured against Asda's property assets and put just £780m of their own capital at risk - meant that Asda became a heavily leveraged business as a result.

The warning signs

An early warning sign came when, in August 2021, the well-regarded Roger Burnley stepped down as Asda's chief executive after reportedly falling out with the brothers over strategy.

Asda failed to appoint a successor despite making overtures to several big names in the industry and, in early 2022, the search was suspended. The search is now back on again, led by headhunters Spencer Stuart, amid reports that a £10m-a-year salary is on offer to the right person.

A run of criticism

In the meantime, Asda's high borrowing has weighed on it, something which did not go unnoticed by the Competition and Markets Authority which, in an investigation last year into whether motorists were being over-charged for fuel, singled out aloss of competitivenessat Asda - previously seen as the industry leader when it came to cutting petrol and diesel prices.

There was further embarrassment when, in July last year, the Business Select Committeecriticised the brothersfor their "opaque" accounting after an excruciating hearing during which Mohsin Issa declined to answer several questions on whether Asda had increased its profit margins on fuel since the takeover.

Stability was further undermined by constant speculation that the brothers had fallen out.

This was strenuously denied but, in June this year, Zuber Issaagreed to sellhis 22.5% shareholding in Asda to TDR - giving the latter a controlling 67.5% stake. Reinforcing the sense that the brothers were going their separate ways, EG Group sold its remaining UK forecourts to Zuber for £228m, while the latter stepped down from EG Group's board in the process.

Many of the problems with Asda's operational performance have been laid at the door of Mohsin Issa and his comparative lack of experience in supermarket retailing.

There have been severalclashes with unionsover staffing levels in the business, with long-standing employees complaining at having to do too much, while a push to disentangle Asda's IT systems from those of Walmart also created upheaval.

Losing patience

Trying to keep the show on the road and bring order to the chaos have been Lord Rose of Monewden, Asda's chairman since 2021 andMichael Gleeson, the chief financial officer.

But even Lord Rose, a lauded figure in retailing for his leadership of Marks & Spencer in the 2000s, appears to be losing patience, telling the Sunday Telegraph at the weekend: "I am going to be perfectly honest with you. I've been in this industry for a long time and I am slightly embarrassed. I won't deny that.

"I don't like being second, third or fourth. And if you look honestly now at the comparative numbers of Kantar or whatever index, we are not performing as well as we should be. And I don't like that."

Declaring that Mohsin needed to relinquish day-to-day running of Asda, Lord Rose added: "We need a full-time, fully experienced retail executive to come in… we always said Mohsin was a particular horse for a particular course.

"He is a disrupter, an entrepreneur, he is an agitator. We've added a significant number of stores and we've changed a lot, but it now needs a different animal.

"In the nicest possible way, Mohsin's work is largely complete."

Hopeful signs

All is not yet lost for Asda.

It has a number of new high-profile recruits due to join in coming months. And it also appears to be listening more to its customers, with Mr Gleeson announcing last week an increase in the staffing of checkouts.

It is impossible to avoid the sense, though, that it desperately needs a full-time chief executive and quickly.

Planning on visiting some of London and the UK's top attractions this summer?

If you're not already aware, you can get 2-4-1 entry or a third off ticket prices to some of the UK's top attractions just by traveling by train.

Many of the attractions in the National Rail deal are in London, but not exclusively.

You only need to follow these four simple steps:

• Choose an attraction from this list;
• Download and print your vouchersorbuy your tickets online;
• Travel by train;
• Present your voucheroronline tickets and train tickets.

By doing so, you can save yourself some serious funds - especially if you were travelling by train anyway.

For example, let's say a family of four visited London to see the waxworks at Madame Tussauds.

They travelled from Basingstoke and headed to the attraction at 1pm on Monday.

If they had bought two adult and two children's tickets for their chosen slot on the official website, it would have cost £144.

But by using the National Rail deal, the cost of entry was £73.32.

That's a saving of £70.68.

Pay your train fare in savings

Train travel isn't cheap - in fact, Sky News found the UK has the most expensive train travel in Europeevenbefore the latest price hike in March.

Train tickets to get two adults and two children (under 15) into London from Basingstoke just before 10am on Monday would have cost a combined £90 (assuming no railcards).

By contrast, if they had gone by coach, it would have cost them £23.30 in total (although the journey would have taken around an hour longer).

This hypothetical family may have saved £70.68 on their Madame Tussauds tickets, but they're still around £20 down - because they're travelling by train.

The good news is that the national rail deal can be used across multiple attractions (if used on the same day) - meaning customers can effectively pay for their train tickets via the savings they'll make by attending multiple venues.

If we apply that to our earlier example, the family could have also visited the London Eye, SEA LIFE Aquarium as well as the waxworks - making savings at each along the way, which would cover the cost of their train tickets and more.

They could also have shaved off pennies on meals out, like 2-4-1 off pizza and pasta atAzzurro Italian Bar & Kitchen Waterloo (when a drink is purchased).

Further savings could have been made with annual railcards and hunting around the best times to travel and to book attractions.

All prices correct as of time of writing. Train/bus tickets were advanced singles.

Outside the capital

As mentioned, the majority of the attractions on the list are in London, but there are plenty outside of the capital.

Thorpe Park, Warwick Castle and Alton Towers are among the attractions listed across the UK - you can read the full list here.