UK Inflation Rate Falls Back to 0%


British inflation rate decreased to 0 percent in August of 2015 from 0.1 percent in July, in line with market expectations as falling oil prices keep dragging transport cost down. However, the monthly rate posted the first rise in three months, up 0.2 percent.

Year-on-year, the larger downward pressure came from transport prices (-2.6 percent from -1.9 percent in July, the deepest fall since April), food and non-alcoholic beverages (-2.4 percent from -2.7 percent in July) and recreation and culture (-0.9 percent from -0.6 percent). In addition, prices of clothing and footwear rose at a slower 0.6 percent (1.7 percent in July) and cost of health and communication increased at a lower pace (1.8 percent and 1.1 percent respectively from 2.3 percent and 1.3 percent in July). 

In contrast, upward pressure came from cost of housing and utilities (up 0.4 percent, the same as in the previous two months), restaurants and hotels (up 1.8 percent from 1.6 percent in July) and furniture, household equipment and routine maintenance (up 0.4 percent, following a 0.3 percent fall in July). 

On a monthly basis, consumer prices rose 0.2 percent, rebounding from a 0.2 percent drop in July. The largest upward contributions came from prices of furniture, household equipment and maintenance (up 1.7 percent), food and non-alcoholic beverages (prices, overall, were little changed), mainly mineral waters, soft drinks and juices and, to a lesser extent, milk, cheese and eggs. These were partially offset by downward effects from bread and cereals, and meat. 

On the other hand, the largest downward contributions came from transport prices (up 0.1 percent in August from 1.2 percent in July), mainly motor fuels, with diesel prices falling by 6.2 pence per litre and petrol prices also falling by 2.4 pence per litre. There was a large downward contribution from sea transport, with fares rising by less than a year ago. These effects were partially offset by a small upward contribution from air fares, which rose by more than a year ago, particularly on long-haul routes. In addition, cost of recreation and culture dropped 0.4 percent (0.2 percent in July), most notably books and cultural services.

The core inflation rate which strips out increases in energy, food, alcohol and tobacco, slowed to 1.0 percent from 1.2 percent in July.


ONS | Joana Taborda | joana.taborda@tradingeconomics.com
9/15/2015 10:26:38 AM