UK inflation rate remains at 3.1%

CPI annual inflation – the Government’s target measure – was 3.1 per cent in August, unchanged from July. Although unchanged overall, at the more detailed level, there were significant upward and downward pressures on CPI annual inflation between July and August.

The largest upward pressures came from:

air transport where fares rose by 16.1 per cent this year (a record for a July to August period) compared to a rise of 8.3 per cent a year ago. The largest upward effects came from long haul and European routes

clothing and footwear where prices overall rose by 2.8 per cent this year, which is the largest rise between July and August since 2001. The largest upward effects came from women’s outerwear where, in particular, prices rose sharply this year at the start of the 2010 autumn season

food where the largest upward effects came from bread and cereals, and vegetables. Bread and cereal prices rose by 1.2 per cent between July and August this year but fell by 1.0 per cent a year ago. The fall last year was a record for a July to August period whereas the rise this year, with the exception of 2008 (when prices rose by 1.4 per cent), is the strongest for a July to August period. The upward effects this year include wheat related products such as breakfast cereals, cakes and dried potted snacks. Vegetable prices overall fell between July and August this year but by less than a year ago

The largest downward pressures to the change in CPI inflation came from:

falling second-hand cars prices between July and August this year compared to sharp price rises a year ago (stock shortages led to higher prices for second-hand cars during 2009)

fuel and lubricants where prices, overall, fell by 1.0 per cent between July and August this year but rose by 1.0 per cent a year ago, principally reflecting a fall of 1.2 pence per litre in the price of petrol this year compared with a rise of 1.1 pence per litre a year ago

In the year to August, RPI annual inflation was 4.7 per cent, down from 4.8 per cent in July. The main factors affecting the CPI also affected the RPI.

RPIX inflation – the all items RPI excluding mortgage interest payments – was also 4.7 per cent in August, down from 4.8 per cent in July.

As an internationally comparable measure of inflation, the CPI shows that the UK inflation rate in July was above the provisional figure for the European Union. The UK rate was 3.1 per cent whereas the EU’s as a whole was 2.1 per cent.