Inflation eases slightly in August to 9.9% after drop in fuel prices

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Britain’s annual inflation rate eased slightly to 9.9 per cent in August, but remains close to a 40-year high.

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The Office for National Statistics said the consumer price index fell last month after a record reading of 10.1 per cent in July.

The drop comes as a surprise, with city economists predicting a modest growth of 10.2 per cent.

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The ONS said the biggest pressure on inflation was the price of motor fuel, which has been falling in recent months.

The 6.8 per cent fall in fuel prices was the highest between March and April 2020, the early days of the pandemic when oil prices turned negative in some markets.

“The reduction in the annual inflation rate in August 2022 primarily reflects the decline in the price of motor fuels in the transportation portion of the index,” the ONS said.

“The small, partially offsetting, upward impact came from increased prices for food and non-alcoholic beverages, miscellaneous goods and services, and clothing and footwear.”

But Jorge Lagarias, chief economist at Accountancy Mazar, warned that it would be some time before inflation actually subsides.

“High energy prices for all the past months have completely permeated most of the supply chain and it will take months for end-consumer prices to come down meaningfully again. Inflation may remain a central theme at least till the end of the year,” he said.

“However, input costs have started to decline and we should eventually see this feeding into normal prices.”

The figures show a positive trend for the first time in more than a year. According to official data, inflation has increased every month since September 2021.

This has put pressure on homes across the country, whose cost of living has soared, largely due to rising energy costs.

No part of the economy has survived the energy crisis, which has helped drive up the prices of food and other commodities.

Experts believe that the support on energy bills announced by the government last week will ensure that inflation does not reach the high levels that were predicted.

According to one prediction, CPI inflation could have topped 20% as energy bills continued to rise.

But the bill for the average household for the next two years will be capped at £2,500 a year, new Prime Minister Liz Truss announced on Thursday.

Without that support the bills for the average family were estimated to rise to £7,700.

Yale Selfin, chief economist at consultancy KPMG UK, said: “The new measures announced by the government to limit energy prices for households at £2,500 could lead to a more modest 10.5% inflation peak in October.

“However, with inflation in the near double digits, the combination of expected tax cuts and support measures for households could prompt the Bank of England to take a more drastic approach to avoid high inflation.

“This could result in faster rate increases and higher rates to counter the inflationary effects of the expected fiscal liberalisation.”


Source: www.standard.co.uk

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