According to Taiwan’s Trade Inc., recent economy data out of the United Kingdom suggests that the post-Brexit bounce is already losing momentum. The substantially weakened pound sterling helped to send inflation to its highest in almost two years in September with the CPI increasing to 1%.
The cost of clothing and fuel were the chief components of the jump even though the country’s Office for National Statistics (ONS) said there was no clear evidence that the weaker pound was instrumental in driving prices higher.
If the ONS assertions are correct and sterling’s value against foreign currencies is less of a factor in the inflation figures, there could be far worse to come for British households.
A so-called “flash crash” on the currency markets last month sent sterling to as low as $1.14 against the US dollar and, although it quickly recovered, residual downward pressure on the pound has remained as Prime Minister, Theresa May, set a time line for triggering Article 50 which will herald the start of negotiations of terms by which Britain will leave the European Union.
“One has to bear in mind that the CPI is a stripped out measure of inflation,” said a source at Trade Inc..
“A more realistic rate of inflation as represented by a more inclusive index like the RPI is at 2% and things will get worse from here on in.”
Trade Inc. said it is adding to holdings in multi-nationals and utilities like BP and Glaxo, both of whom earn significant portions of their income from overseas sales which translate into higher earnings when those revenues are repatriated and converted into sterling.
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