UK inflation falls further in August

Perhaps we really are inching closer to economic recovery: the ONS has just revealed that inflation fell to 2.5% in August.

by Michael Northcott
Last Updated: 19 Aug 2013

Whilst there is no drastic improvement, there is definitely a sense that the UK economy is very gradually picking up. First, further falls in unemployment numbers, and now another drop in the rate of inflation. According to the latest figures from the Office for National Statistics (ONS), consumer price inflation (CPI) dropped from 2.6% in July to 2.5% in August. This continues a general downward trend since the high of 5.2% last September. Definitely not to be sniffed at.

For the high street, the news is similarly pleasing: the retail price index (RPI) fell from 3.2% in July to 2.9% in August. The Office for National Statistics puts the drops down to a slowing down of price increases in clothing and household goods (furniture and maintenance). Perhaps with mortgages pretty hard to come by, the Great British public have popped down to Ikea instead of trying to move house. Well, if that recession must continue to rage on, then we’d certainly like to enjoy Midsomer Murders on the comfiest possible sofa, wouldn’t we?

So what were the negative influences on inflation? The ONS says the principal factor offsetting the falling inflation was higher transport and fuel costs. The cost of oil has risen 30% in the last four months alone, prompting some to worry that easing inflation won’t last long. Petrol prices rose 3.5p per litre to £1.35 in August, and diesel rose 3.3p to £1.40 per litre. So whilst the stuff you want from the shops is cheaper, filling the car to get into town for your shopping spree is costing you at the other end. 

Still, with a government keen to squeeze as many positive sounding figures out of the Treasury as possible, these inflation figures are good news. They have even triggered speculation that the Bank of England may embark on another round of quantitative easing to keep the downward trajectory going…

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