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Inflation climbs to 0.6% in June

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There was a slight uptick in inflation to 0.6% in June – the first rise recorded since the start of 2020.

The Consumer Prices Index (CPI) rose slightly from 0.5% in May to 0.6% in June, according to the Office for National Statistics (ONS).

This is the first time a rate rise has been recorded this year, after spiralling its way down from 1.8% in January. Inflation was last at 0.5% in June 2016.

The ONS said the uptick was due to prices in recreation and culture, with rising prices for games and clothing being partially offset by falling food prices.

The ONS also identified 67 basket items that were unavailable to consumers in June, though this figure was down from the 74 unavailable items in May and 90 in April.

Inflation, including owner occupiers’ housing costs (CPIH) was 0.8% in June 2020, up from 0.7% in May 2020.

Surprise uptick but predictions difficult to make

Adrian Lowcock, head of personal investing at Willis Owen, said June’s UK inflation rate “confounded expectations” after climbing to 0.6% but remains well below the Bank of England’s 2% target.

He said: “Although there are likely to be some spikes in inflation, we expect it to remain low, with oil prices significantly lower than they were last year, and wages also unlikely to contribute to inflation anytime soon.

“With inflation set to remain subdued, and possibly dip further towards zero, over the coming months, it means interest rates will be going nowhere, so investors need to shop around for higher returns on their cash savings, or look to investments like shares to try to generate returns.”

Laura Suter, personal finance analyst at AJ Bell, said the figure comes as lockdown eased and the usual seasonal sales of items “went out the window”.

Suter said: “Clothing prices pushed up inflation, as they would usually follow a pattern of lots of buying before summer sales hit in May and June. The coronavirus lockdown trampled on this usual pattern of buying and so while lots of clothes are on sale at the moment, they haven’t seen the big one-month fall in prices in June they usually would.”

She added that the inflation rise in June doesn’t necessarily mean it’s only going to head upwards this year.

“As we see the effects of lockdown easing further we’d expect to see some increases in prices. But everyone from the Bank of England to the Office for Budget Responsibility expects inflation to fall further this year, before rebounding slightly next year. Once the fall in the oil price and the cut to energy prices from Ofgem’s price cap has filtered through the system, we should see inflation start to meaningfully pick up again. However, so much could happen with the pandemic and economy between now and then that even the most avid betting man wouldn’t take on the gamble of predicting where inflation will be this time next year,” she said.

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