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UK Inflation Climbs to six-month high in August: ONS

The UK recorded a steep rise in its annual inflation rate which hit a six-month high in August unexpectedly amid higher season hike in sea, airfares, and other prices, said Office for National Statistics (ONS) in a statement on Wednesday (19).

The consumer prices index (CPI) 12-month rate was 2.7 per cent in August 2018, up from 2.5 per cent recorded in the previous month. The CPI including owner occupiers’ housing costs (CPIH) annual inflation rate was 2.4 per cent in August 2018, up from 2.3 per cent registered in July, this year.


Rising prices for a range of recreational and cultural goods and services, transport services and clothing produced the largest upward contributions to the change in the rate between July and August 2018, ONS highlighted.

Bank of England (BoE) had raised interest rates for the second time last month since the economic crisis and indicated only a gradual increase in borrowing costs in the future. Last week, the BoE said it estimated inflation to move down to 2.4 per cent in August.

The ONS also noted UK house prices moved up at the lowest annual rate in nearly five years, pulled down by the highest fall in London house prices since 2009.

According to the analysts, the increase in the rate of inflation in August could cause a setback to the modest recovery in real terms wage growth that has supported economic growth this year so far.

Partially offsetting downward contributions came from furniture and household goods, and telecommunications as the prices for these rose between July and August 2018 but by less than a year ago.

Transport continues to make the largest upward contribution to the rate, with prices rising by 6 per cent in the year to August 2018, the highest 12-month rate since April 2017. The largest contribution within the transport group continues to come from motor fuels.

Other large upward contributions came from housing and household services (principally from owner occupiers’ housing costs and domestic utilities) and recreation and culture. Prices for recreation and culture rose by 3.6 per cent between August 2017 and August 2018, the highest 12-month rate since January 2010 when it was also 3.6 per cent.

The final, large upward effect came from clothing and footwear, with average prices rising by 3.1 per cent between July and August 2018 compared with a smaller rise of 2.4 per cent between the same two months a year ago.

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