Falling petrol prices pushed Britain’s inflation rate back below 10% in August in the first easing of upward pressure on the cost of living in almost a year.
The consumer prices index – the government’s preferred measure of inflation – dipped from 10.1% in July to 9.9% last month, with cheaper motoring costs more than offsetting the impact of dearer food.
Despite the better-than-expected figure, the Bank of England is still expected to raise interest rates by 0.5 points when its monetary policy committee meets next week.
Inflation remains more than three times higher than the 3.2% recorded in August 2021 and almost five times higher than the official 2% target. Core inflation – which strips out fuel, food, alcohol and tobacco and is closely monitored by the MPC – rose from 6.2% to 6.3% last month.
Data from the Office for National Statistics (ONS) showed petrol prices dropping by more than 14p a litre in August as a fall in global oil prices was finally reflected in cheaper motoring costs. The annual inflation rate for motor fuels eased from 43.7% to 32.1% between July and August.
Food price inflation rose for a 13th successive month, hitting a fresh 14-year high of 13.1% in August, with marked increases in the cost of milk, cheese and eggs.
The ONS said the cost of food and non-alcoholic beverages had risen throughout 2022, and the 1.5% increase between July and August 2022 was the largest between the two months since 1995.
Clothing and footwear prices rose by 1.1% between July and August as summer sales ended, compared with a 0.2% rise last year, pushing up the annual inflation rate from 6.6% to 7.6%
Further increases in the annual inflation rate are expected in the coming months as households are hit by rising domestic energy bills but the capping of the average annual bill at £2,500 will mean the peak is now expected to be lower, at about 11%.
Separate ONS figures for producer prices – which are a guide to inflationary pressure in the pipeline – showed some signs of easing. Fuel and raw material costs rose by 20.5% in the year to August, down from 22.6% in the year to July, while the cost of goods leaving factory gates was up by 16.1% in the year to August compared with 17.1% in the year to July.
The general secretary of the union Unite, Sharon Graham, said: “Rocketing inflation may have been eased last month but that won’t last. Current levels continue to threaten the living standards of millions of workers.”
Paul Dales, the chief UK economist at Capital Economics, said: “With the oil price now just above $90 a barrel, fuel prices will fall further in the coming months. And after the 25% month-on-month rise in utility prices on 1 October (as the Ofgem price cap increases to £2,500), which will add 0.7 percentage points to CPI inflation and drive it to a peak of about 11%, the government price freeze means that utility price inflation will slump from 69.7% now to zero by October next year.”
