uploads///UK Inflation in May

UK Inflation Unchanged: Is It Supporting Growth in the Economy?

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Dec. 4 2020, Updated 10:53 a.m. ET

UK inflation in May

According to a report provided by the Office for National Statistics, the United Kingdom’s inflation index remained unchanged in May compared to April. It rose 0.4% in May compared to the same percentage rise in April. It was in line with the market’s expectation of a 0.4% rise.

Similarly, on a yearly basis, May’s inflation in the United Kingdom (EWU) remained unchanged compared to the previous month. It stood at 2.4% in the month compared to 2.4% in April, slightly below the market’s expectation of a 2.5% rise.

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Components of inflation

The improvement in the inflation index was mainly the result of improvements in the prices of fuel, energy, and transportation. However, the prices of food, housing and utilities, beverages, and nonalcoholic beverages witnessed a softer rise in May.

Although inflation remained unchanged, some components of inflation witnessed a strong rise. In spite of inflation, manufacturing and services activity in the United Kingdom witnessed strong improvements in May. However, economic growth in the first quarter of 2018 was below the market’s expectation. If these economic indicators continue to show improvement, we can expect economic growth to pick up.

The broader market UK FTSE 100 Index (UKX-INDEX) rose 2.2% in May. However, the iShares MSCI United Kingdom (EWU), which tracks the United Kingdom’s performance, fell 0.6% in May.

In the next article, we’ll analyze the indicators investors should watch for next week.

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