August inflation dips slightly to 9.9%

The Office for National Statistics’ (ONS) Consumer Price Index (CPI) has recorded a 0.2 percentage point dip in August in the annual rate of inflation on the previous month’s high.

The latest ONS data reveals inflation remains high, but dipped slightly to 9.9% year-on-year price growth, down on July’s figure, which hit double figures for the first time since the 1980s. The downward pressure on prices was largely due to falls in petrol prices over the past month, although food prices continued to rise steeply, offsetting much of the improvement.

The annual rate for motor fuels eased from 43.7% to 32.1% between July and August 2022, with petrol prices down 14.3p per litre on July; diesel prices also fell 11.3p per litre over the same period

Food and drink prices, however, saw their highest month-on-month rise since the mid nineties, with August prices up 1.5% on July’s figures. Annual inflation for the category now stands at 13.1% and was the largest upward contributor to the August CPI.

Despite the high inflation, the rate of price growth in the UK remains comparable with other G7 economies. Across the Atlantic, inflation in the USA stands at 8.3%, while on mainland Europe, Italy has seen 9% inflation, 8.8% in Germany, and 6.5% in France. Inflation rates in all major economies following a similar curve as global factors, including the ongoing war in Ukraine and associated sanctions on Russia having an effect worldwide.

With economists expecting inflation to continue to rise throughout the rest of 2022, it is expected that the Bank of England will continue to raise interest rates in the coming weeks to attempt to slow price rises further, although an upcoming meeting of the Bank’s Monetary Policy Committee has been postponed due to the death of Her Majesty Queen Elizabeth II.

Intervention by Prime Minister Liz Truss on domestic energy bills will also help to slow the overall rate of inflation by imposing a new annual price cap of £2,500 for the average household for two years. Business energy customers are also expected to benefit from a six month cap, the details of which are yet to be confirmed.