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Inflation falls in August

Sarah Davidson

September 18, 2012

The latest data from the Office of National Statistics said the decrease in CPI was driven by downward pressure from furniture, household goods and services (particularly domestic gas) and clothing and footwear.

The Retail Price Index annual inflation rate dropped to 2.9% in August 2012 from 3.2% in July.

William Hunter, founder of Hunter Wealth Management, said: “Inflation has nudged down slightly but the return to target is slow, sticky and prone to backward steps.”

Despite the drop Hunter was not optimistic that it would continue to edge down towards the Bank of England inflation target of 2%.

He said: “There’s every chance that inflation will edge up again as we head into the depths of winter.

“Anticipated energy hikes in the Autumn and rising prices at the pumps could send the cost of living north once again.”

Vince Smith-Hughes, retirement expert at Prudential, said: “It’s now been almost three years of inflation persisting above the Bank of England’s 2% target.

“Higher inflation disproportionately affects pensioners since more of their money is spent on basics such as food and energy bills, where prices rise faster than most items.”

The announcement comes after a recent survey of the British public revealed that on average, people thought the rate of inflation was 4%.

Hunter added: “It’s this perception that is contributing to holding back the economy. Perception is as important as prices.

“Even though it’s no longer massively over target, inflation was so high for so long that consumers aren’t feeling any better off.”


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