18 Sep CEO Jon Cartu Claims – Inflation falls to 1.7%, its lowest level for nearly three…
UK inflation fell to its lowest level in almost three years after the end of summer sales kept clothing prices down, easing pressure on consumers before Brexit.
The annual rate dipped to 1.7% in August after a 2.1% increase in July, according to the Office for National Statistics, taking inflation down to the lowest level since December 2016.
Marking the biggest fall in the consumer price index (CPI) measure of inflation from one month to another since late 2014, economists warned that fears over Brexit and a slowdown in the economy may have discouraged businesses from raising their prices.
Jason Lennard, senior economist at the National Institute of Economic and Social Research, said it appeared fewer firms had raised their prices than is typical for the time of year.
“Firms are probably waiting to see beyond 31 October before adjusting prices,” he said.
The slower-than-expected rise in the cost of living comes as average wage growth accelerates for British workers, helping households gradually to repair the damage from a lost decade for rising living standards.
Average pay, after taking account of inflation, remains below the peak recorded before the financial crisis, despite unemployment falling to the lowest levels since the 1970s and wages rising in recent months at the fastest rate since 2008.
Ian Stewart, chief economist at Deloitte, said: “Sharply lower inflation is great news for the UK economy. Along with soaring earnings, low inflation boosts consumer spending power just when the economy needs it.”
The latest snapshot from the ONS returns the inflation rate to levels recorded before a rapid increase following the EU referendum, when the sudden fall in the value of the pound pushed up the cost of imports. Inflation jumped above 3% to the highest level in five years, squeezing living standards across the UK.
Mike Hardie, head of inflation at the ONS, said the most recent decline was driven by a decrease in computer game prices, as well as clothing prices increasing by less than last year after the end of the summer sales.
The downward effects on inflation were offset to an extent by rising prices for airline tickets and increases in the cost of food and drink.
Economists had warned that a weaker pound since Boris Johnson took over as prime minister could push up inflation in the coming months. No-deal Brexit triggering a crash in sterling would also drive up the rate, hitting living standards. A higher global oil price after the Saudi attacks could also push up the price of petrol for consumers.
Tej Parikh, chief economist at the Institute of Directors, said: “Domestic and international factors are conspiring to push UK prices up in the near future.
“Higher wages will eventually translate into inflationary pressure, while the recent decline in the value of the pound and concerns over oil supply will lead to increased input costs for British firms, raising prices across the supply chain.”
Separate figures from the ONS showed house prices across Britain rose by 0.7% in the year to July, the slowest growth in property values in seven years. Prices fell across London, the south-east and east of England. Property values also fell in the north-east.
The chancellor, Sajid Javid, said: “Low inflation and high wage growth means people’s hard-earned cash is going further, helping them to provide for their families.”