UK inflation pressures mount as bounce-back slows only slightly
Inflation pressures faced by British firms hit record levels this month, and growth in the private sector cooled only slightly from an all-time high in May when coronavirus restrictions were lifted, a survey showed on Wednesday, Trend reports with reference to Reuters.
The preliminary reading of the IHS Markit/CIPS UK Composite Purchasing Managers' Index (PMI) pointed to one of the strongest monthly improvements in business activity since 1998, with a reading of 61.7 - not far off May's unprecedented 62.9.
Input costs matched a previous record increase from June 2008 and prices charged by firms rose by the largest amount since these records began in 1999, as disruption to supply chains caused a scramble for components.
Inflation faced by consumers could now have a lot further to rise after breaking above the Bank of England's 2% target last month, said Chris Williamson, chief business economist at IHS Markit, which compiles the survey.
The BoE is not expected to change monetary policy when it announces the outcome of its June policy meeting on Thursday but investors are waiting to hear whether it is sticking to its view that the rise in inflation is likely to prove transient.
Hugh Gimber, global market strategist at J.P. Morgan Asset Management, said the PMI showed the private sector was struggling to keep up with the vaccine-driven rebound in demand.
"Today's data will strengthen the conviction of those on the Monetary Policy Committee who believe that extraordinary levels of policy support are no longer warranted," he said.
But Samuel Tombs, at consultancy Pantheon Macroeconomics, said an expected rise in unemployment as the government's job protection scheme winds down over the next three months, and an easing of COVID-19 bottleneck pressures on prices, meant the BoE would probably not be swayed by short-term inflation signals.