The pound’s recent rout against the euro and US dollar was stemmed last week after UK inflation rose at the fastest annual rate in nearly two years in September.
The rise from 0.6% to 1.0% was slightly ahead of consensus forecasts and was led by a rise in clothing and fuel prices. The figures provide more evidence that the pound’s slump will precipitate a rise in inflation beyond the Bank of England’s 2% target level over the course of next year as retailers are increasingly forced to pass on higher import costs.
The pound gave little reaction to data showing September’s UK retail sales were flat compared with August, disappointing expectations for a 0.3% rise.
However, the bigger picture remained rosier with sales growth accelerating from 1.1% to 1.8% in the third quarter, suggesting UK consumers turned out in force over the summer months.
UK employment grew by a stronger-than-expected 106,000 in the three months to August. The unemployment rate held steady at 4.9%, its lowest level in more than a decade. The data suggests the jobs market continues to show admirable resilience.