UK inflation rate falls to 2.7pc in August

Robyn Hall

September 17, 2013

It means prices are still rising faster than wages, which rose by 1.0% on average over the same period.

The Office of National Statistics said the largest contributions to the fall in the rate came from the transport, particularly motor fuels and air transport, and clothing sectors.

These were partially offset by an upward contribution from furniture, household equipment and maintenance.

The other main inflation measures were unchanged between July and August: the CPIH, which takes into owner occupier housing costs grew by 2.5% and the RPIJ, an improved variant of the Retail Price Index which complies with international standards, grew by 2.6%.

These latest numbers continue the trend of broadly steady inflation seen since spring 2012.

Samuel Tombs, UK economist at research company Capital Economics, said this latest fall marks another step towards the 2% rate which now seems achievable within the next six months.

He said: “The drop largely reflected a smaller contribution to inflation from petrol prices. This was partly offset by a small rise in food price inflation from 3.9% to 4.1%.”

Tombs said he continues to think that CPI inflation is likely to fall back to the 2% target within the next few months – a development that would help to ease the squeeze on households’ real earnings and cool fears in the markets that one of the inflation knockouts to the Monetary Policy Committee’s forward guidance is likely to be breeched.

Vince Smith-Hughes, retirement expert at Prudential, added: “Changes in inflation will affect households differently depending on their spending patterns and circumstances.

“The combined effects of falling retirement incomes and inflation that is still above the desirable level, make pensioners amongst the most financially vulnerable. It’s vital therefore, to take account of inflation when making any financial plan for the future, particularly if you’re drawing income from a pension fund.”

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