Consumer prices rose 4.4 percent from a year earlier, breaching the government's 3 percent upper limit for a third month and the most since comparable records began in 1997, the Office for National Statistics said today in London.
House prices fell in July and retail sales dropped as Britain veered closer to a recession, reports showed today. Record oil and food costs have kept inflation above the target for 10 months, prompting the Bank of England to refrain from interest-rate reductions since April.
Consumer-price increases are also accelerating in the euro region, where the inflation rate rose to 4.1 percent in July, the highest since April 1992 and more than double the European Central Bank's ceiling of 2 percent.
The U.K. inflation rate jumped from 3.8 percent in June. The 0.6 percentage point increase on the month was the biggest since the series began in 1997. Based on a constructed index using retail-price data, it was the largest gain since 1991, the statistics office said.
Consumer prices stayed unchanged on the month. The inflation rate jumped after the cost of food and non-alcoholic drinks rose 12.3 percent from a year earlier, the most on record, and energy prices increased, the statistics office said.
Oil prices have dropped 19 percent since reaching a record above $147 a barrel on July 11. They are still more than 60 percent higher than a year ago. Producer prices increased in July at the fastest pace since records began in 1986, the statistics office said yesterday.
So-called core inflation, which strips out costs of food, energy, tobacco and alcoholic beverages, accelerated to 1.9 percent in July, the most since June 2007.
Retail-price inflation, which pay negotiators use as a measure of the cost of living, quickened to 5 percent, the fastest pace since 1991. Excluding mortgage-interest payments, it reached 5.3 percent, the most since 1992, today's report showed.
Faster inflation has yet to stoke pay pressures. Wage data due tomorrow will probably show salaries including bonuses increased 3.6 percent in the second quarter, the weakest pace in almost a year, according to the median of 30 forecasts.
Slowing economic expansion may curb inflation. The International Monetary Fund last week slashed its forecasts for U.K. growth to 1.4 percent this year and 1.1 percent in 2009. The economy expanded 3 percent in 2007.
House prices fell in July as the squeeze on credit locked out buyers and brought the property market to a ``virtual standstill,'' the Royal Institution of Chartered Surveyors said today. Sales in shops open at least a year fell an annual 0.9 percent, the British Retail Consortium said in a separate report.