How has the Brexit vote affected the UK economy? Over the past month, sterling has surged to its highest level since the day after the referendum following firm suggestions from the Bank of England that it could raise interest rates from as early as November in order to curb inflation. Although many economists now expect a rate hike in the coming months, some argue the Bank may find it difficult to justify higher borrowing costs amid continuing uncertainty over Brexit.

The surging pound caused the index of Britain’s largest listed companies to record a decline on the previous month – down 1.6%. Companies on the FTSE 100 make a significant part of their earnings in foreign currencies, so a weak pound boosts their bottom line and thus their stock prices. When sterling rises, the opposite happens. The FTSE 250 list, which has more companies rooted in the UK economy, has fallen by about 1% over the past month compared with August.

Inflation has risen since the Brexit vote as the pound’s sharp drop – it has fallen 9.5% since 23 June 2016, despite a recent recovery – makes imports to the UK more expensive. Last month, the squeeze on living standards worsened due to the increased cost of importing fuel, clothes and food, pushing inflation up to 2.9%, from 2.6% in July. The Bank of England now estimates the consumer price index will peak above 3% in October. Mark Carney, the Bank’s governor, also used a speech in Washington to argue that a sharp reduction in migrant labour to Britain after the EU referendum has the potential to cause a spike in inflation. That’s pushing the rate setters at Threadneedle Street to consider raising interest rates as soon as November.

There has been some evidence since the vote of a boost to exports from the weaker pound, raising hopes that a stronger trade performance can offset a downturn in consumer spending. But the latest official trade figures show efforts to expand trade in goods beyond the EU’s borders took a knock in July. Overall, the UK trade deficit for goods and services remained unchanged at £2.9bn between June and July, beating economists’ expectations for it to widen to £3.2bn.

Key barometers of companies’ sentiments about business activity were disappointing in August, barring the manufacturing sector, which stands to benefit from the drop in the value of the pound making goods more attractive overseas. The UK’s biggest sector, services, missed expectations amid uncertainty over the Brexit talks, as the Markit/CIPS purchasing mangers’ index (PMI) came in at 53.2 in August, down from 53.8 in July, signalling the slowest pace of business expansion in 11 months. While construction also missed expectations, the August manufacturing PMI beat economists’ forecasts. The PMI measures are tracked for early clues on official GDP figures.

Britain borrowed just £5 Britain borrowed just £5.56bn to balance the books last month, the smallest deficit for any August since the financial crisis. That beat City forecasts and was down from £6.9bn a year ago. Higher-than-expected tax receipts gave the public sector finances a bump, which will help the chancellor, Philip Hammond, as he prepares for November’s budget. After a strong start to the year for the exchequer, if the pattern remains consistent over the full fiscal year, the deficit over 2017-18 – the difference between state expenditure and income – would come in well below the £58.3bn forecast by the Office for Budget Responsibility in March’s budget.

The jobless rate fell to 4. 3% from 4 The jobless rate fell to 4.3% from 4.4% in the latest labour market update. This beat economists’ forecasts for no change and represented a 42-year low. Still, wages are not rising as fast as forecast by economists, indicating that tightness in the jobs market is not yet helping workers’ bargaining power to drive up earnings. Analysts said the burgeoning gig economy – work that offers no guaranteed income – was behind the rise in jobs, leading to only modest rises in pay. Average earnings rose by 2.1% in the three months to July, although the Office for National Statistics said that left workers suffering a 0.4% cut in real wages when accounting for inflation. There could, however, be wage increases ahead, as Carney, the Bank of England governor, estimates that a sharp fall in EU migrants coming to work in Britain could push up earnings.