Image credit: Flickr/Gerard Stolk

Inflation deflates to 2.7% in August

The Consumer Prices Index is down slightly - but it's not enough for consumers.

by Emma Haslett
Last Updated: 12 Nov 2013
A good day for new Bank of England governor Mark Carney: figures published this morning by the Office for National Statistics show the consumer prices index – inflation, basically – dropped to 2.7% in August, creeping nearer its 2% target.

The figure dropped from 2.8% in July, pushed by slower rises in the cost of airfares, petrol and diesel prices and clothing.

Interestingly, upward pressure came from the household equipment category as retailers jacked up the price of electric fans by a wallet-busting 18% during the hot weather.

But it’s not all good news for cash-strapped consumers. For a start, the Retail Prices Index, which is used to set benefits and rail fares, rose by 3.3%, up from 3.1% in July.

And given the average payrise is about 1%, and has been for several years, it means we’re all still less-well off. Just slightly less less-well off than in July.

The fact that clothing prices drove the fall (they rose just 2% between July and August, compared with 2.8% last year) is also a worry, given the fact that the struggling high street indulged in huge amounts of cost-cutting over the summer to shift stock languishing in back rooms. Falling inflation driven by desperation isn’t really the sort preferred by economists.

Still: the good news to homeowners, who might otherwise have worried that falling inflation will mean a rise in interest rates, is that even if CPI hits its 2% target, interest rates won’t rise until unemployment drops to 7%. So at least there isn’t that to worry about. Small mercies…

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today