UK inflation has slowed more sharply than expected in July. The annual rate fell to 2% from 2.5% in June, the ONS stated. Economists had forecasted a rate of 2.3%. It is the first easing in inflation since February, but economists said the drop is likely to be temporary.
Prices were unchanged between June and July, following a monthly gain of 0.4% in June. The biggest upward pressure came from transport costs. Alongside price rises for second-hand cars, compared with falls a year ago.
In the Eurozone, inflation picked up to 2.2% in July from 1.9% in June – marking the highest annual rate in nearly three years, above the European Central Bank’s 2% target, final data released by the EU’s statistics office showed this morning. It confirmed an earlier estimate. The ECB is predicting further increases in inflation in the coming months, but sees this as largely temporary. Underlying price pressures remain muted, with a core measure of inflation that strips out volatile food and fuel rising at an annual rate of 0.9%, the same as in June. This is also the same as the earlier reading
In terms of the FX market in general, the main headline has been the sharp rise in wages. June’s Average Earnings Index – with bonuses included – stood at 8.8%, which is above the 8.6% that was forecast and the 7.3% reported in May.
GBP was tipped to remain supported in the wake of some better-than-expected employment data this morning. Although, the currency was seen to be under some near-term pressure amidst a bout of selling on global markets.
Domestically, headlines are supportive of the Pound. The ONS have reported that the unemployment rate has fallen to 4.7% in June. This was a surprise to analysts who were expecting it to remain at 4.8%.
This improvement was driven by a rise in new jobs of 95K in the three months prior to June. A stronger print than the 75K that was expected, a marked improvement on the previous reading of 25K.
GBPEUR is trading in the 1.17’s
GBPUSD is trading in the mid 1.37’s – 1.38’s
EURUSD is trading in the 1.17’s
Production & Freight Update
The rising consumer demand, coupled with the impacts of not only Covid and Brexit, has caused disruption to global sea freight, resulting in container shortages, vessel delays and blank sailings as shipping lines work to reposition their fleet.
Aircraft capacity remains depressed as passenger air services continue to be constrained due to restrictions on international travel.
As a result, freight costs have soared with no let-up in sight, as companies try to secure what little space there is regardless of cost.
In recent weeks, due to increasing cases of the contagious Delta variant of COVID-19, countries have been forced to impose new lockdowns and introduce stricter quarantine measures. China, already dealing with the aftermath of a typhoon has seen a surge of cases, which has resulted in reduced production capacity & disrupted cargo operations at both airports and seaports. Increased congestion and vessel delays has resulted as local authorities implement quarantine measures to try to contain cases and prevent the further spread.
In response, Goudsmit UK are continuing to advise all customers at the point of quotation and order confirmation of the extended lead times so that they can be factored in when planning. We would request that you review your current requirements and advise of any issues asap. Furthermore, we would urge you to review your requirements for 2022 at the earliest opportunity.
Whilst freight delays are unavoidable at this time, we work with our customers by holding UK stock. We would encourage that 6-8mths of buffer stock is considered when re-ordering new production. This helps to reduce the impact of potential freight delays and lessening the potential requirement of costly airfreight.