UK inflation slips back to 0% in August amid falls in fuel and clothing prices

Source: Dukascopy Bank SA
"With low unemployment, one of the highest levels of vacancies since 2001, and strong domestic growth, the UK economy continues to look healthy. This is despite economic uncertainty and shaky confidence in some of the UK's largest trading partners, notably China and the Eurozone"
- Michael Martins, economic analyst at the Institute of Directors

The UK annual rate of inflation returned to zero in August after a positive reading in July, driven by falls in fuel and clothing prices. According to the Office for National Statistics, British consumer prices remained flat in August, compared with a year earlier, following an annual 0.1% gain in the prior month and staying in line with expectations. Month-on-month, the CPI rose to 0.2% in the reported month after dropping into negative territory in July. The core CPI inflation, which excludes volatile food and energy costs, also decelerated in line with predictions to 1.0% after rising to 1.2% in the preceding month.

The another bunch of data from the UK revealed that factory gate prices fell 0.4% in August and were down 1.8% lower than a year earlier, while input prices declined 2.4% on the month and by 13.8% on the year. Meanwhile, with inflation in the UK hovering around zero, the Bank of England is not under immediate pressure to raise rates from their current ultra-low level of 0.5%, though Britain's economy is showing solid growth. Therefore, a decision on when to hike interest rates is likely to come into sharper focus at the turn of the year.


© Dukascopy Bank SA

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