Introduction: UK inflation declines quicker than forecast

Good morning and welcome to our ongoing coverage of business developments, financial markets and the global economy.

Positive updates to start the day as inflation across the UK eased during June to 2.6 percent.

Forecasters predicted the consumer price index would ease to 2.7 percent from 2.8 percent in May. Instead the figure dropped further than anticipated largely owing to reduced motor fuel costs especially for diesel according to the Office for National Statistics.

Grant Fitzner chief economist at the ONS noted that food prices decreased this month with items such as chocolate margarine and beef contributing. Clothing costs also dropped with the launch of summer sales featuring larger reductions than the prior year.

The expense of raw materials fell for the first time since January mainly because of cheaper crude oil while the rise in factory gate prices moderated once more.

Yet experts caution that inflation risks could increase later this year owing to ongoing conflict in the Middle East.

George Brown senior economist at Schroders observed that reduced fuel prices slowed inflation in June yet this view offers limited forward insight. With oil prices climbing again amid fresh tensions in the Middle East inflation challenges may emerge ahead.

For the Bank of England the key issue remains whether this stays an energy shock or shifts into a domestic inflation concern. A cooling labour market so far indicates little danger of second round effects that might require tighter policy.

This should permit policymakers to maintain a steady approach. While markets anticipate more than two rate increases over the coming year we expect the Bank to hold steady while assessing if the latest energy shock proves temporary or more lasting.

Nevertheless the easing in inflation is likely to be welcomed by the new Downing Street team as Andy Burnham pledges additional cost of living assistance.

The agenda

7am BST: UK inflation for June
7am BST: Wetherspoon Q4 Reach half year results
9pm BST: Alphabet Q4 results

Key events

34m ago Mirror publisher drops 20 percent as online traffic declines
1h ago Oil keeps rising as Middle East conflict intensifies
1h ago JD Wetherspoon releases fourth profit warning of the year
2h ago Food inflation eases to 1.7 percent as sugar chocolate and fat prices fall
2h ago Inflation slowdown may prove false dawn businesses caution
2h ago Government has much more to do to assist with cost of living says chancellor
2h ago Introduction: UK inflation declines quicker than forecast

Mirror publisher drops 20 percent as online traffic declines

A challenging outlook faces Reach the firm behind the Daily Mirror and Daily Star as shares fell more than 20 percent this morning.

The publisher informed investors that digital revenue declined 11 percent in the first half amid fewer Google referrals that cut online traffic sharply. On platform page views dropped 40 percent versus the same point last year and indirect revenues fell 16.2 percent.

Meanwhile print revenue kept falling dropping 8.3 percent to 178 million pounds. Overall the firm recorded a statutory operating loss of 43.5 million pounds largely from a 36.1 million pound non cash impairment tied to closing two print sites plus 21.7 million pounds amortisation of publishing rights and titles and 18.9 million pounds in restructuring costs.

Duncan Ferris an analyst at broker Freetrade noted the company finds itself in a difficult spot cutting costs to sustain profits while readers depart rapidly.

Its revenue decline has sped up with digital issues worsening as falling Google referrals reduced web traffic and hit programmatic advertising hard. Broad cost reductions protected profits from much of the damage yet operating profits still eased. Steps to manage costs have been strong with Reach closing print operations in Watford and Glasgow.

The main problem is weakening revenue in both segments. Neither print nor digital currently appear positioned for growth. Reach can trim costs to protect profit but options remain limited before progress stalls.

Oil keeps rising as Middle East conflict intensifies

Oil prices continue climbing this morning as the US military finished its 11th night of strikes on Iran.

Brent crude the global benchmark rose 2.7 percent to 93.46 dollars a barrel adding to UK concerns that inflation may not continue easing.

European stock markets opened weakly with the Stoxx Europe 600 down 0.3 percent led by tech sector losses. The German Dax edged up 0.03 percent while the French Cac 40 fell 0.1 percent. The UK FTSE 100 slipped 0.02 percent.

JD Wetherspoon releases fourth profit warning of the year

Further proof that pubs face particular pressure from rising inflation comes as JD Wetherspoon issued its fourth profit warning in seven months.

Chairman and founder Tim Martin stated in a short update that profits for the year are likely to fall short of market forecasts with slightly lower sales than expected in the final quarter alongside higher costs in food labour repairs energy and business rates.

The FTSE 250 pub group reported like for like sales rose 4 percent in the 12 weeks to 19 July 2025 versus the prior year. Year to date like for like sales increased 4.2 percent.

The company last warned in May that profits might come in slightly below the then market forecast of 73 million pounds.

Shares in the pub chain fell 9.6 percent this morning.

Kallum Pickering chief economist at broker Peel Hunt also contends the inflation cooldown will prove short lived and that the rate could exceed 3 percent by year end.

Any dovish signal for the Bank of England from softer UK headline CPI will be outweighed by the firmer core reading. The June figures are unlikely to change money market expectations for a hold next week or a hike in September yet we believe markets will be surprised in September when the BoE holds again.

Today data are unusually backward looking given recent re escalation in the Middle East. Ahead the inflation outlook grows more complex. Commodity prices are rising again as Middle East tensions grow and the July energy price cap increase will raise household bills.

Inflation therefore appears set to exceed 3 percent in the second half. Yet as UK underlying fundamentals stay disinflationary scope exists for further positive surprises even as price momentum builds.

Rob Booth chief UK economist at consultancy Pantheon Macroeconomics also forecasts inflation will likely climb above 3 percent this year.

Looking ahead previous Chancellor Rachel Reeves temporary summer VAT cuts on meals and recreation will slow services inflation further in July before a sharp rebound to 4.0 percent in September as those tax cuts end. We must consider seriously the possibility that business surveys which previously guided underlying services inflation well have now diverged. But for now underlying services inflation easing well below the survey guidance points to some upward correction ahead. We expect inflation to peak at 3.3 percent in November after accounting for new PM Mr Burnham VAT cut on energy utilities.

The largest downward impact on inflation came from motor fuels particularly diesel the ONS found.

The average diesel price fell 10.7 pence per litre between May and June compared with a drop of just 0.6 pence in the same period last year. The average price reached 176.4 pence per litre last month.

Meanwhile petrol prices fell 2.1 pence per litre in June the first decline since the start of Middle East conflict in February. Its June average stood at 155.3 pence per litre.

Food inflation eases to 1.7 percent as sugar chocolate and fat prices fall

A slowdown in food prices will be especially welcome for shoppers.

The ONS reports food and non alcohol drink prices rose 1.7 percent in June down from an annual rate of 2.2 percent in May. On a monthly basis the figure slipped 0.2 percent.

The largest declines occurred in sugar jams syrups chocolate and confectionery.

Drops also appeared in oils and fats particularly margarine and other vegetable oils meat particularly beef dairy and vegetables.

Harvir Dhillon an economist at the British Retail Consortium an industry body said the food price drop was aided by strong supermarket competition.

Food inflation saw a particularly notable drop its lowest in almost two years with prices falling on the month. This was driven largely by intense supermarket competition aiming to attract customers during warm weather despite supply chain pressures.

Dr Liliana Danila chief economist at the Food and Drink Federation adds that rising food price inflation is still anticipated as the year progresses yet this is likely to be lower arrive later and plateau longer than the previous cycle.

With disruption now standard for the food system it is critical that the new prime minister treats food security seriously and partners with industry to ensure the food system invests for growth and resilience from vital tech adoption to future facing skills.

Inflation slowdown may prove false dawn businesses caution

Businesses remain unconvinced the inflation slowdown will persist. Martin Sartorius lead economist at the Confederation of British Industry predicts inflation will firm in coming months.

We expect this easing will prove temporary. Inflationary pressures are likely to strengthen over the next few months reflecting the ongoing impact of the Iran conflict on energy bills and some pass through to domestic prices. Renewed tensions in the Middle East mean households and businesses will continue facing an uncertain and volatile outlook as autumn approaches.

We anticipate the Bank of England Monetary Policy Committee will keep interest rates unchanged when it meets next week as it maintains a wait and see stance on the economy. Although risks stay elevated a loosening labour market soft domestic activity and tighter financial conditions mean the Committee is unlikely to raise rates soon.

Suren Thiru chief economist at the accounting body ICAEW describes the inflation slowdown as a false dawn.

June slowdown is a false dawn as it may have already been reversed this month with higher energy bills following Ofgem energy price cap rise likely to have lifted inflation above 3 percent.

Though stubborn services and core inflation suggest the UK remains exposed to inflationary fallout from the Iran war weaker wage growth and a sluggish economy will help limit any second round effects.

Renewed US Iran hostilities have reignited inflation fears with rising oil prices and supply chain pressures returning the prospect of inflation touching 4 percent later this year despite October VAT cut on electricity bills.

Elevated inflation will likely become a more notable economic concern for the new chancellor in coming months by deepening the cost of living crunch while also squeezing fiscal headroom raising borrowing costs and increasing financial market volatility.

These benign figures remove any remaining prospect of a July rate rise particularly as rate setters may want to assess the impact of measures announced by the new Prime Minister before deciding whether to tighten policy again.