UK CPI at 1.8% in August

CPI annual inflation was 1.8 per cent in August, down from 1.9 per cent in July.

The largest downward contribution came from reductions in the cost of financial services with some lenders cutting their mortgage exit administration fees in light of the Financial Services Authority Statement of Good Practice for these charges. This required lenders to review their approach to these fees as there were concerns that consumers were being charged more than they had expected.

Other large downward contributions came from:
Gas and electricity bills which fell as a result of the continued phasing in of tariff reductions. Over the same period last year, average bills rose.

Clothing and footwear, mainly due to women’s outerwear where prices rose with the introduction of the new season’s stock, but by less than last year.

Changes in the price of appliances and products for personal care
The main upward pressure came from recreation and culture, due to changes in the cost of admission to live music events and theatres, and changes in the price of pre-recorded DVDs and CD ROMs.

Further upward pressure came from communication. Average landline telephone bills rose this year, following changes to tariff structures and charges; last year, by contrast, there were cuts in line rental charges. There was also a small upward effect from increases in pay-as-you-go mobile phone tariffs.

RPI inflation rose to 4.1 per cent in August, up from 3.8 per cent in July, mainly due to an increase in average mortgage interest payments, with most lenders passing on July’s quarter point increase in the Bank rate. Mortgage interest payments are excluded from the CPI. Other factors influencing the RPI were similar to those affecting the CPI, apart from charges for financial services which have a much lower weighting in the RPI.

RPIX inflation – the all items RPI excluding mortgage interest payments – was 2.7 per cent in August, unchanged from July.

As an internationally comparable measure of inflation, the CPI shows that the UK inflation rate in August, at 1.8 per cent, was close to the provisional figure for the European Union as a whole of 1.9 per cent.

UK CPI at 1.8% in August

National Statistical Office
9/18/2007 7:50:54 AM