Inflation hits 4.7 per cent

UK annual inflation was 4.7 per cent in August, up from 4.4 per cent in July, according to the Office for National Statistics (ONS).

The largest upward pressure came from housing and household services due to a rise in average gas and electricity bills this year, compared with a fall last year. There was a large, partially offsetting, downward effect from the price of heating oil which fell by more than last year, following a decrease in the price of crude oil.

There were further large upward pressures from:

food and non-alcoholic beverages where prices rose by more than last year. There was an upward effect from breakfast cereals and pizzas, meat and fruit

miscellaneous goods and services, particularly from mortgage arrangement fees, which decreased by less than last year, and products for personal care (such as hair dryers and toilet rolls), where prices rose this year but fell last year

There was a large downward pressure from transport costs, mainly due to the price of fuels and lubricants which fell by more than a year ago. The average price of petrol fell by 5.5 pence per litre between July and August this year, to stand at 113.3 pence, compared with a fall of 0.6 pence last year. There was a large, partially offsetting, effect from air fares and the cost of sea transport; both rose by more than last year.

There was a further large downward pressure from communication where telephone charges were unchanged this year but rose a year ago.

Retail Prices Index (RPI) inflation fell to 4.8 per cent in August, down from 5.0 per cent in July. The main factors affecting the CPI also affected the RPI. Additionally there was a large downward contribution from housing where the effect came mainly from mortgage interest payments and depreciation. Last year most lenders passed on a quarter point increase in the Bank rate which led to an increase in average mortgage interest payments whereas this year the Bank rate was unchanged. Both mortgage interest payments and depreciation are excluded from the CPI.

RPIX inflation – the all items RPI excluding mortgage interest payments – was 5.2 per cent in August, down from 5.3 per cent in July.

As an internationally comparable measure of inflation, the CPI shows that the UK inflation rate in July, at 4.4 per cent, was level with the provisional figure for the European Union as a whole of 4.4 per cent.