Inflation slides to lowest level since late 2016

Inflation slides to lowest level since late 2016
The fall in inflation during August was steeper than analysts predicted.
// UK inflation rate in August fell to its lowest since November 2016, according to the ONS
// Consumer Prices Index was 1.7% last month, compared with 2.1% in July
// This was driven by a decrease in video game prices, ans fashion prices rising less than last year

Inflation slid to the lowest level in almost three years in August, driven by tumbling video games prices and a slowdown in fashion price increases.

ONS figures show the Consumer Prices Index (CPI) was 1.7 per cent last month, compared with 2.1 per cent in July.

This was the lowest rate of inflation since November 2016.

The fall was also steeper than analysts predicted, having forecast inflation of 1.9 per cent.

“The inflation rate has fallen noticeably into August, to its lowest since late 2016,” ONS head of inflation Mike Hardie said.

“This was mainly driven by a decrease in computer game prices, plus clothing prices rising by less than last year after the end of the summer sales.”

Prices for recreation and culture were 0.6 per cent down against the previous month, as it was heavily affected by falling prices in the volatile games, toys and hobbies category.

The category – which is heavily impacted upon by the calendar for video games – slid five per cent against the previous month on the back of heavy discounting.

Clothing and footwear also contributed to the decline, as prices increased by 1.8 per cent, significantly slower than the end of the equivalent summer sales period last year.

Meanwhile, alcoholic drink prices saw a slowdown in growth to 0.5 per cent, after beer prices sank by 1.1 per cent and there was a slowdown in inflation in wine prices.

However, food prices increased by 0.6 per cent during the month on the back of rising bread, cereals and meat prices.

The Retail Prices Index (RPI), another measure of inflation, dipped to 2.6 per cent for August from 2.8 per cent in July.

“There was further good news on the consumer front this morning as the latest CPI figures revealed a noticeable fall in inflation to 1.7 per cent – well below the Bank of England’s target of two per cent, and the previous month’s 2.1 per cent,” said Emma-Lou Montgomery, associate director for personal investing at Fidelity International.

“When you add into the mix last week’s news that UK wages rose at their fastest rate for 11 years and combine that with unemployment being at a 45-year low, it would appear that despite all the doom and gloom, consumers are looking pretty comfortable right now.

“However, while at face value today’s inflation data may appear to be further welcome news, it may also ring alarm bells, as further evidence of a weakening economy amid the ongoing Brexit uncertainty.”

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