Inflation has risen back above the Bank of England‘s 2 per cent target in the first increase of 2024 after the end of the ‘Taylor Swift effect’ on the UK economy.
The Office for National Statistics said Consumer Prices Index (CPI) inflation rose to 2.2 per cent in July, up from 2 per cent in June after months of steady decline.
It represents the first time inflation has climbed since December 2023, driven partly by a sharp drop in energy bills last July falling out of the annual calculations.
Analysts claimed the UK economy had been boosted by Taylor Swift’s Eras Tour, which temporarily increased the cost of hotels in June, but this had now ended.
The pop star played sell-out shows in Edinburgh, Liverpool and Cardiff as well as three in London – with hotel prices then falling after she left Britain, although there could be another boost as she returns to Wembley for five more from tomorrow.
Swift’s fans, known as ‘Swifties’, are expected to boost the London economy alone by £300million as the capital hosts more Eras Tour shows than any other city in the world, with nearly 640,000 people expected to attend across the eight dates.
City analysts said the economy was also boosted by fans splashing out on train tickets and restaurants – in addition to busy pubs during the Euro 2024 tournament.
The ONS said the rate of Consumer Prices Index inflation rose to 2.2% in the 12 months to July
Taylor Swift performs during her Eras Tour at Wembley Stadium in London on June 22
Susannah Streeter, head of money and markets at Hargreaves Lansdown, told MailOnline: ‘The Taylor Swift effect also appears to have a slight hand in these figures, as the main downwards pressure on inflation was a fall in hotel room costs from June, when she was on her UK tour.
‘Pop star Pink’s UK appearances also saw spikes in prices in some cities in June.
‘It now seems more unlikely that the surge-pricing effect will turn into a recurrent inflationary pressure, as it clearly depends on the brightness of the stars.’
It comes after a Barclays ‘Swiftonomics’ report issued last month found Swift’s tour is expected to provide a £997million boost to the UK economy.
Some 1.2million fans are estimated to be spending an average of £848 on tickets, travel, accommodation, outfits and other costs to see the star at one of her 15 UK tour dates – more than 12 times the average cost of a night out.
Ahead of today’s inflation figures being released, the Bank of England said a fortnight ago on August 1 that the fall-away of energy bills in the wider inflation figures would show ‘more clearly the prevailing persistence of domestic inflationary pressures’.
The latest figures mean that prices are rising faster across the country than in previous months, but still at a slower rate than in 2022 and 2023 when households and businesses were being squeezed during the peak of the cost crisis.
The data comes after the Bank of England’s Monetary Policy Committee voted to cut interest rates to 5 per cent earlier in August, a quarter-point reduction.
The headline inflation figure of 2.2 per cent is lower than the 2.3 per cent that most City economists were expecting, and undershoots the Bank’s own forecast.
However, the rise in inflation could still set the tone for the MPC’s policy at its next decision in September, where most economists predict they will hold rates and wait until November before cutting borrowing costs again.
Officials expect inflation will continue to nudge up for the rest of 2024 before falling gradually again.
The closely watched annual rate of CPI services price inflation fell to 5.2 per cent in July, down from 5.7 per cent in June, its lowest rate since June 2022.
Fans walk towards Wembley Stadium on June 21 ahead of Taylor Swift’s first London concert
Experts have warned that persistently high services price inflation could risk pushing the overall inflation data up further, but the drop could provide some encouragement to policymakers.
The annual Retail Prices Index (RPI) inflation rate was 3.6 per cent. The July RPI inflation rate has historically been used as the base for train ticket price rises for the following year, though it was not used in 2022 or 2023. Fares increases were capped below the RPI rate in 2023, after it was 9 per cent for the month.
Darren Jones, Chief Secretary to the Treasury, said: ‘The new Government is under no illusion as to the scale of the challenge we have inherited, with many families still struggling with the cost of living.
‘That is why we are taking the tough decisions now to fix the foundations of our economy so we can rebuild Britain and make every part of the country better off.’
Fans outside Wembley Stadium ahead of Taylor Swift’s first London concert on June 21
The rate of core CPI, a measure which excludes energy, food, alcohol and tobacco from the figures, was 3.3 per cent in the year to July 2024, down from 3.5 per cent in June.
Ed Monk, associate director for personal investing at Fidelity International, said the drop in core figures suggests the ‘trajectory for price rises is still downwards’.
It comes after the Office for National Statistics revealed yesterday that wage growth, another key driver of headline inflation, was 5.4 per cent year on year over the three months to June, down from 5.7 per cent in the previous three months.
Martin Sartorius, principal economist at the Confederation of British Industry (CBI), said: ‘Inflation undershooting the Bank of England’s expectations will be seen as a positive sign that price pressures are continuing to normalise for households and businesses.
Taylor Swift performs during her Eras Tour at Wembley Stadium in London on June 23
‘Today’s data will give the Bank’s Monetary Policy Committee some measure of confidence that domestic price pressures are less likely to derail a sustainable return to the 2 per cent target.
‘A second consecutive cut in interest rates next month is not a certainty, however.
‘This is because the MPC will still be mindful of upside risks to the inflation outlook, especially as pay growth remains stubbornly high.’
Meanwhile, Sarah Coles, head of personal finance at Hargreaves Lansdown, said the inflation rise is ‘not massively welcome, especially for people hoping to be able to enjoy the new space in their budgets created by wage rises, but it’s not a huge upset either’.
‘It’s likely to be business as usual at the Bank of England in September, with rates on hold, so it’s unlikely to alter the picture significantly for savers and borrowers,’ she said.
Taylor Swift on stage at Wembley Stadium in London on June 21 during her Eras Tour
Luke Bartholomew, deputy chief economist at fund manager Abrdn, said the fall in the rate of services inflation ‘should help reassure some policymakers that inflation pressures are proving slightly less persistent than feared’.
‘After yesterday’s solid labour market report, the Bank will not be in any hurry to cut rates again immediately, but the ongoing slowing in inflation pressure means there is certainly scope for at least one more rate cut this year.’
The CPIH, a measure of inflation which includes owner-occupiers’ housing costs, rose by 3.1 per cent in the 12 months to July, up from 2.8 per cent in June.
Shadow chancellor Jeremy Hunt said the inflation figures showed more needed to be done to keep prices under control.
He stated: ‘Today’s figures show how important it is that the new Labour Government follows the path of the previous Conservative government and focus on keeping inflation low.
Taylor Swift performs during her Eras Tour at Wembley Stadium in London on June 21
‘In government, we took the difficult decisions to reduce inflation from 11.1 per cent to the Bank of England’s target of 2.0 per cent – paving the way for the first interest rate cut in four years.
‘However, there is clearly more to be done to keep inflation down.
‘The Chancellor must not use this data as an excuse to break her promises and hike up taxes – tax rises she had planned all along.’
Meanwhile Liberal Democrat Treasury spokeswoman Sarah Olney claimed the figures showed the cost-of-living crisis had not ended.
She said: ‘Today’s figures are a stark reminder that the cost-of-living crisis is far from over. Years of Conservative chaos have devastated families up and down the country as countless people are still paying the price of Conservative mismanagement.
‘From mortgage payments and rail fares to the cost of food in supermarkets people are feeling a hangover from hell all thanks to successive Conservative prime ministers.
‘The Government needs to tackle the cost-of-living crisis head-on, starting by investing in our farmers to bring down food prices, saving families money by expanding free school meals to all children in poverty and implementing a one-year freeze to rail fares.’