JULY RATE OF INFLATION FALLS BACK TO 1.6 percent

The annual rate of UK inflation rate fell in July as the Consumer Price Index (CPI) fell by 0.3%, to 1.6% from 1.9% a month earlier, reports the Office for National Statistics (ONS).

The rate fell more than was forecast, with economists expecting it to fall to 1.8%.

The CPI 12-month rate (the amount prices change over a year) between July 2013 and July 2014 stood at 1.6% largely due to easing in the cost of clothing, footwear, food and non-alcoholic drinks which fell by 0.4% in the latest month. This means that a basket of goods and services that cost £100.00 in July 2013 would have cost £101.60 in July 2014.

Commenting on the latest inflation figures, Liberal Democrat Chief Secretary to the Treasury Danny Alexander said:

“The fact that inflation has been below the Bank of England target for seven consecutive months shows that subdued inflation is now becoming the norm as the economy recovers.”

He continued to add that eliminating the deficit fairly, and repairing the UK economy remains central to their role:

“These encouraging inflation numbers should give businesses the confidence they need to deliver the investment required to boost productivity. Rising productivity is the only route to sustainable increases in living standards.”

The latest information continues the trend of below 2.0% inflation during 2014 although there has been some volatility in the rate over recent months.  Over the last five years, the three main contributors to the 12-month inflation rate have been housing, water, electricity, gas & other fuels, restaurants & hotels and transport (including motor fuels). Combined, these three sectors have, on average, accounted for almost half of the 12-month inflation rate each month.

Graph above shows the CPI 12-month rate over the last 10 years.

Read the full report at ONS