UK Inflation Rate Slows to 1.6%


The UK annual inflation rate decelerated to 1.6 percent in July from 1.9 percent in June. Falls in clothing prices contributed the most to the drop while other downward effects came from alcohol, financial services and food.

By far, the largest downward contribution to the change in the CPI 12-month rate between June and July 2014 came from clothing and footwear: prices, overall, fell by 5.7 percent between June and July this year compared with a smaller fall of 3.2 percent between the same two months a year earlier. Prices of clothing and footwear always fall between June and July due to the summer sales season but this year the fall is larger than in recent years. 

Other notable downward contributions to the change in the CPI 12-month rate between June and July 2014 came from alcohol and tobacco (prices, overall, fell by 0.7 percent between June and July this year but rose by 0.6 percent a year ago). The downward effect came from a range of alcohol products, principally spirits and wine. Cost of miscellaneous goods and services fell between June and July this year but rose a year ago. The largest downward contribution came from financial services, particularly bank overdraft charges and fees for bankers’ drafts. Prices of food and non-alcoholic beverages fell between June and July this year but rose between the same two months a year ago. There were small downward effects from a number of product groupings including bread and cereals and sugar, jam, syrups, chocolate and confectionery.

The largest upward contribution to the change in the CPI 12-month rate between June and July 2014 came from transport prices (rose 1.3 percent between June and July 2014, compared to a rise of 0.9 percent between the two months a year earlier). The upward contributions came from second-hand cars and sea transport. 

On a monthly basis, consumer prices fell 0.3 percent in July. 

Annual core inflation, which strips out cost of energy, food, alcohol and tobacco, slowed to 1.8 percent in July from 2 percent in June.

UK Inflation Rate Slows to 1.6%


ONS | Joana Taborda | joana.taborda@tradingeconomics.com
8/19/2014 9:49:47 AM