Nancy Curtin, chief investment officer at Close Brothers Asset Management:
“Despite strong increases in energy prices, inflation has defied expectations and remained subdued. This should enable the UK to feel some benefit of wage growth in June which will be a relief for consumers. While this should be supportive of consumption, the prospect of real-terms wage growth is not enough on its own to change investors’ perceptions of the UK economy. Muted wage growth continues to drag on economic growth as does choppy industrial production, while manufacturing growth is slowing too. The UK’s productivity also remains exceptionally low, and until this is tackled meaningfully, profitability gains will be hard-won. UK businesses may need to start investing in productivity enhancing tech, but to do so, they need greater certainty about the UK’s future trade policy with the EU.”
Simon Longfellow, Head of stepstoinvesting.com:
“For yet another month we continue to see high inflation. This coupled with last month’s interest rate decision means consumers will continue to see their money being eroded. Looking ahead, after a positive month for the UK with the hot weather and a summer of sport boosting the UK economy, we may well see the Bank of England increase rates as early as next month. But it’s important not to lose sight of that that cash savers will continue to see next to nothing on their money.
“One alternative to holding your money in cash is to invest it. But not everyone is aware of the benefits nor do they feel confident enough to put their money into these potentially higher yielding alternatives. Naturally people are fearful of what they do not understand, and are concerned about the risks and complexities, so one solution is to help educate people about investing, including the risks involved.”
Giles Cross, CEO of FOLK2FOLK comments on today’s ONS inflation figures:
“Although inflation has stayed the same, moving towards the Bank of England’s target, the squeeze on UK households isn’t over. The dual impact of inflation and low interest rates means consumers will continue to see next to nothing on their hard earned money and disposable incomes will continue to feel stretched. After a successful month with the ongoing heatwave, World Cup fever and the Wimbledon affect, the boost to consumer spending could temp the Bank of England to raise rates within the next month or so.
“That said, rates would need to increase significantly for consumers to see a real difference, as such they’ll need to look beyond the traditional saving methods if they want their money to work harder and beat inflation. The investment landscape has evolved in recent years with the extension of ISA limits and the introduction of new products such as the Innovative Finance ISA (IFISA). By allowing P2P lending platforms to be part of the ISA wrapper, those wanting a positive return on their money can now benefit from inflation beating returns with less volatility than stock and shares.”
Ben Brettell, Senior Economist, Hargreaves Lansdown:
“Inflation was more subdued than expected in June, with prices rising 2.4% year on year, leaving the rate unchanged from May. Economists had expected higher energy prices to push the rate up to 2.6%, but in the event this was offset by summer clothing sales.
“The pound dropped sharply on the news, losing around three-quarters of a cent against the dollar as traders revised their bets on an August rate rise. Sterling has been unwanted of late, falling heavily in the past few weeks amidst political turmoil in the UK.
“Markets had been pricing in around an 80% chance the Bank would lift borrowing costs in August, but today’s inflation data combined with yesterday’s lacklustre wage growth figures could force policymakers into a rethink. That said, output price inflation ticked up to 3.1% and raw material costs jumped 10.2%, so there are some signs inflationary pressure is building.
“There’s certainly a case for higher rates as soon as next month. But I think the decision is more finely balanced than the markets would have you believe. The Bank will be mindful of Brexit-related uncertainty, and may decide to wait for confirmation that the weak first-quarter growth figure was just a blip before raising borrowing costs.
Alistair Wilson, Head of Retail Platform Strategy at Zurich:
“Britain’s inflation rate holding constant will be a relief for households given the slowdown in wage growth in the last quarter. This week’s data is the last to be published on wages and prices before the next interest rate decision, and with inflation remaining within reach of the 2% target, the Bank of England may well put off the rate rise for another few months. In the meantime, households should be smart with any money they do have to hold onto.
“Savers need to be proactive if they are to reap the rewards of their investments in the long-term and taking the time to explore different possibilities to find the best options for them is worthwhile. Feeding a small amount each month into a stocks and shares ISA or a pension fund is a sensible way to build a healthy sum over the years, while also protecting your savings as you go.”
Thomas Wells, manager of the Smith & Williamson Global Inflation-Linked Bond Fund:
“This was a below consensus inflation print and fits with our view that CPI would start to be better behaved as we move into the second half of the year. However, RPI remains elevated at 3.4%.
“The large Brexit-driven surge in inflation due to the slump in the value of the pound is now finally beginning to wash out of the system. Core inflation was significantly weaker than expected at 1.9% year on year, which will make it more difficult for the Bank of England to raise rates, particularly given a backdrop of Brexit and trade uncertainty.
“There is still upward pressure on oil and energy prices, which will be uncomfortable for consumers. However, rising energy costs appear to have been offset by the falling price of clothing, games, toys and hobbies, with the cost of purchasing such items continuing to tumble as the high street tries to combat stiff competition from online retailers.”
