LIVE: FTSE surges as UK food price rises slow to lowest rate in 10 months
The FTSE experienced an increase on Tuesday as the rate of inflation for fresh food in the UK decreased to 11.6% in August, compared to 14.3% in the previous month.
European stock markets experienced an upward trend on Tuesday due to the deceleration of price increases in the UK, reaching the lowest rate observed since October of the previous year.
In London, the FTSE 100 index increased by 1.5% during morning trading, while in Paris, the CAC index rose by 0.4%. Additionally, the Frankfurt DAX index also saw a gain of 0.4%.
Based on the data provided by the BRC, there was a 6.9% increase in prices during the period from August of the previous year, which is a lower rate compared to the 8.4% increase recorded in July. This decline was mainly due to the slower rate at which prices of fresh food items increased. In August, the inflation rate for fresh food decreased to 11.6%, down from 14.3% in the previous month.
"The numbers would have been even lower if the government hadn't raised alcohol taxes earlier this month," stated Helen Dickinson, CEO of the BRC.
Although retailers are making significant efforts to decrease inflation, they still face challenges in managing supply chain risks.
Russia pulling out of the Black Sea Grain Initiative and its focusing on Ukrainian grain facilities, along with unfavorable harvests in Europe and elsewhere, may hinder efforts to reduce inflation.
A possible increase of £400 million in business rates starting in April next year could threaten the measures taken to manage inflation, unless the chancellor takes action.
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Shares were additionally lifted by positive expectations regarding new measures of assistance from China, with the confirmation on Sunday that they will be reducing the tax on stock transactions by 50%.
John Choong, an expert at Investing Reviews, stated: "The actions taken by China to stimulate their economy and the favorable response to Jerome Powell's speech on Friday have also had a positive impact on market confidence. However, it's important for investors to exercise caution and avoid premature celebrations."
Although the current data is positive, the forecast for core and services inflation, which has been emphasized by Andrew Bailey, is still uncertain. Therefore, there is still no conclusive proof of core and services inflation subsiding.
However, if there are more instances of disinflation prints similar to Tuesday's, it is likely that markets will reduce their expectations for the Bank's terminal rate. This, in turn, would be favorable for stocks in the banking and housebuilding industries.
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