UK Inflation Rate Down to 1.5%


UK annual inflation rate slowed for the second consecutive month to 1.5 percent in August of 2014 from 1.6 percent in July. Falls in prices of motor fuels and food and non-alcoholic drinks provided the largest downward contributions while the largest, partially offsetting, upward effects came from clothing, transport services and alcohol.

The largest downward contributions to the change in the CPI 12-month rate between July and August 2014 came from food and non-alcoholic beverages: prices, overall, fell by 0.2 percent between July and August this year but rose by 0.5 percent between the same two months a year ago. There were small downward effects from a number of product groupings with the largest coming from milk, cheese and eggs due principally to price changes for cheese and yoghurts. Prices of furniture, household equipment and maintenance overall rose between July and August but at a slower rate than a year ago. There were small downward effects from furniture and furnishings and glassware, tableware & household utensils.

The largest upward contributions to the change in the CPI 12-month rate between July and August 2014 came from clothing and footwear: prices, overall, rose by 2.6 percent between July and August this year compared with a smaller rise of 2.0 percent between the same two months a year earlier. Overall, prices of clothing and footwear usually rise between July and August as autumn ranges start to enter the shops following the summer sales season. The main upward effect came from a wide range of women’s outerwear. Prices of alcohol and tobacco overall rose by 1.0 percent between July and August this year but fell by 0.1 percent a year ago. The upward contribution came from spirits and wine. For both groups, prices rose this year but fell a year ago.

Although transport, overall, provided only a very small (downward) contribution to the change in the CPI 12-month rate between July and August 2014, this masked larger offsetting effects principally from fuels and lubricants and transport services. Petrol prices fell by 1.8 pence per litre between July and August this year, compared with a rise of 2.0 pence per litre a year ago. Similarly, diesel prices fell by 2.1 pence this year but rose by 2.0 pence a year ago. This effect from motor fuels was largely offset by upward contributions from sea transport, air transport and the purchase of vehicles. 

On a monthly basis, consumer prices rose 0.4 percent in August, following a fell 0.3 percent fall in July. 

Annual core inflation, which strips out cost of energy, food, alcohol and tobacco, accelerated to 1.9 percent in August from 1.8 percent in July.

ONS | Joana Taborda | joana.taborda@tradingeconomics.com
9/16/2014 9:44:35 AM