WeeklyWatch – Inflation figures are hotting up

15th July 2025

Stock Take

Is inflation starting to come to the boil?

It’s been a humid couple of weeks, and inflation in the summer can be just as hot and uncomfortable. A hotter summer is often welcomed, but it can also have a marked effect on inflation. So, what’s in store this sunny season?

Tomorrow, the Office for National Statistics will reveal the latest inflation figures for June, and they’re widely expected to show a rise in inflation, following May’s inflation figures being lower than expected. There was an increase of 3.4% in consumer price inflation (measured by the Consumer Prices Index (CPI)) in the 12 months to May 2025, in comparison to the 3.5% in the 12 months to April. From now on, inflation is expected to take an upward trajectory.

What’s influencing inflation?

When the weather heats up, one of the most evident effects is on food prices, thereby pushing up inflation. Long periods of hot weather can have a significant impact on harvest yields, and reduced supplies of fruit and vegetables results in a price hike for consumers.

Hot British summers also see demand increase for items like barbecues, inflatables and, more and more, fans. This could lead to increased prices as retailers struggle to meet the demand.

But this isn’t unique to the UK. Across the globe, climate change is causing more extreme weather and heatwaves are becoming a regular occurrence. As a result, there’s increased concern regarding the impact it will have on economies in years to come.

Research conducted by the European Central Bank (ECB) discovered that not only do heatwaves push food prices up, but they also lead to reduced economic activity. A recent study revealed how the extreme heatwaves of 2022 increased food prices in Europe by 0.7 percentage points.

The ECB also implied that the hot weather results in reduced productivity and could lead to bigger economic challenges in the upcoming decades as extreme climate events become more common.

Tariffs and the inflation picture

There’s been no lull in tariff talk this week, as developments in the tariff war can also have a negative effect on inflation.

Last week, the US announced that new tariffs would come into force on 1st August. Many people thought that President Trump would adopt a lighter approach following the market tumble after the previous tariff announcement, but he wasn’t deterred. The letters that were distributed to trading partners stated hefty tariffs of 30% for the EU and Mexico. A 25% tariff has been outlined for Japan and South Korea, who are already key trading partners for the US. And Brazil was threatened with a huge 50% tariff.

Despite concerns, the market reaction so far has been relatively calm, potentially with the expectation and hope that there will be some cutback on at least some of these tariffs. US equity indices were mostly flat; the S&P 500 was down 10 basis point for the week (in dollars). For the UK, the FTSE 100 and FTSE 250 indices increased by 1.3% and 0.3% respectively.

There’s only two weeks left for nations to agree on trade deals, and they face more risks further down the road – along with US inflation. Increased US tariffs make the prices of goods from other nations higher which is likely to reduce exports which will impact growth.

The Chief Economist at St. James’s Place, Hetal Mehta, says:

“Once again there has been a scattergun approach. As well as tariffs on individual countries, there are also some sector-specific levies being threatened, such as 50% on copper and a threat that pharmaceuticals could eventually go to 200%. This potentially takes the effective average tariff rate to around 20%.

“At the beginning of the year the average tariff rate was less than 5%. It’s therefore a huge jump to go to 20% and it will be interesting to see how markets continue to react to that news.”

What’s UK economic growth looking like?

The UK is one of a few countries to have reached and signed a trade deal agreement with the US, but that doesn’t mean that we’ve become immune to the impact of the tariffs imposed elsewhere around the globe. Most UK goods exported to the US have a 10% levy attached to them which could result in higher inflation for the country. And if increased inflation passes through, this could become risky for UK economic growth.

Last week’s published figures revealed that the UK GDP fell by 0.1% in May, month on month. This came on the back of a 0.3% drop in April, contrasting the expected modest economic growth rise of 0.1%.

But Mehta dispels the gloomy outlook, saying:

“The fact that growth slowed down from what was a strong start to the year isn’t really a surprise. Given the tax increases that have kicked in and the somewhat weaker business sentiment, we should expect growth to slow down. But the good news is that credit conditions have been easing and that should temper recession risks for the UK.”

If the economy grows at a slower rate, it could help keep inflation figures down. This is because it boosts the chances of interest rates coming into place sooner rather than later.

Andrew Bailey, Governor of the Bank of England (BoE), identified that the UK economy was growing slower than expected but it gave the BoE space to cut interest rates which he thinks will be on a downward trajectory. The current BoE base rate is 4.25%, and investors will be watching closely to see what is decided when the BoE Monetary Policy Committee have their next meeting on 7th August.

How have Europe’s markets responded?

There was an advance in the equity markets, even though those gains were front loaded as the hope of an advantageous trade deal between the EU and US dwindled. There was a rise of 1.1% (in euros) in the MSCI Europe ex UK index, which was boosted by strong gains for France and Germany.

How have Asian markets fared?

The latest stage of the tariff wars was felt significantly by the Japanese markets. The Nikkei 225 fell by 0.6% (in yen). China’s Shanghai Composite added 1.1% (in yuan) encouraged by the possible additional government stimulus to combat the constant deflationary pressures in the economy.

Wealth Check 

Guided to greatness

Success is reliant on the support of others, whether that’s in your life or career. This can come from members of your family, friends, trusted mentors or experts that offer insightful guidance. Earlier this year, St. James’s Place met with leading figures from across the arts and entertainment industry to understand how advice has influenced their journeys.

  • Actor, producer and director David Harewood experienced a lightbulb moment when one of his teachers gave him the idea that he should pursue acting.
  • TV presenter and world-champion dancer Oti Mabuse still leans on the support of two coaches that she’s known since she was a teenager.
  • Actor and singer/songwriter Asha Banks holds profound gratitude for her parents’ encouragement when she starred in musicals as a child.
  • Radio/TV presenter and former dancer Ashley Roberts cites an important early lesson from her ballet teacher regarding professionalism.

Here are some of the highlights they shared…

David Harewood MBE

“About five weeks before I was going to leave school, my teacher phoned and asked me to come in. He said to me: ‘What are you going to do when you leave?’ I was 15. I said, ‘I don’t know, sir.’ And he said, ‘Well, we’ve been talking in the staff room, and we think you should be an actor.’

“It was a eureka moment. I had no idea that was what I could do. There were very few Black actors when I was growing up. But it gripped me. I auditioned for the National Youth Theatre, was accepted, and when I met all these other actors, I thought, ‘That’s my tribe.”

Oti Mabuse

“We did a lot of dance camps where we’d [learn about how to take care of our] mental health. Because it’s tough to grow up in a world where you’re weighed when you do shows and your dress must look a certain way.

“It was making sure that, as teenagers, we understood that we’re going to go through this. I had two incredible coaches, Lorcia Cooper and Rafiq Hussain. Their philosophy was that everything starts from inside and will be reflected outwards.”

Asha Banks

“My parents aren’t in the industry. I just went to this audition [for Les Misérables]; my mum and my grandma came up to London with me, and I managed to get the part.

“When I look back now, it would have been impossible for me to do any of the shows that I did without my parents. They had to get on the train every day, take me up to London, then sit in a café and wait for me. As a kid, you don’t appreciate it. Now, I feel very lucky to have parents who were able to help me do that.”

Ashley Roberts

“I started dance when I was about three – a little half-tap, half-ballet class. And then it grew from there – dance became my passion and my escape. My ballet teacher said to me: ‘If you don’t show up on time, door closed: you ain’t getting in.’ That has stuck with me to this day.”

Four pieces of advice passed on:

  1. David Harewood – Keep on learning: “When I got Homeland, I hadn’t worked for almost nine months. It was probably the worst time of my career. When I first arrived in America, I would go to the set, and I would sit in the corner and watch (actors) Mandy Patinkin and Claire Danes work. I learned so much in that period.”

  2. Oti Mabuse – Failure is a great teacher: “We fail, but we learn. You learn so much from failing – and I’ve only learned that later in life. Now, when I fail at something, I say, ‘You know what? I had a good time, and I learned something.”

  3. Asha Banks – Keep your feet on the ground: “When things are being blown out of proportion, my mum always says: ‘Life’s not over; no one’s dead.’ It’s easy to dramatise things. But remembering where we are and putting things into perspective has been really helpful.”

  4. Ashley Roberts – Be open to opportunities: “I started presenting by being on the road with The Pussycat Dolls. There were fans who would stay outside, and I started interviewing them. I edited it together, and I just put it out on social media. Someone from MTV hit me up and asked if I wanted to host some shows. So, follow stuff that you love and enjoy, but also stay open and stay curious.”

Watch the conversations between David, Oti, Asha and Ashley in full here.

In the Picture 

The magical Wimbledon fortnight has come to an end: the trophies have been awarded, the Pimm’s has been shelved and the strawberries and cream have been devoured. But while it may all be over for another year, the benefits of making a small annual investment – the cost of a top-of-the-range Wimbledon ticket, for example – has the potential to make many an investor feel like a champion.

If you were to invest £315 today in the stock market, and assumed an annual growth rate of 6.25%, in 50 years’ time, it could be worth nearly £15,000. But someone who invested £315 in the stock market annually could potentially get an investment worth more than £105,000 in 50 years’ time.

Investment Specialist at St. James’s Place Corinne Lord says:

“This offers a reminder of the power of compounding and the long-term potential of investing.

“Investing regularly and staying the course, despite inevitable volatility, can significantly improve financial outcomes.”

The ball’s in your court!

These figures are examples only and they are not guaranteed – they are not minimum and maximum amounts. What you get back depends on how your investment grows and the tax treatment of the investment. You could get back more or less than this.

The information contained is correct as at the date of the article. The information contained does not constitute investment advice and is not intended to state, indicate or imply that current or past results are indicative of future results or expectations. Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.

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SJP Approved 14/07/2025