UK inflation remained unchanged last month, according to official figures, but food and drink price rises have accelerated for the fifth month in a row.
The Office for National Statistics (ONS) announced on Wednesday the rate of Consumer Prices Index (CPI) was 3.8 per cent in August, the same as July. This was the level that most economists had been expecting.
However, the rate of food and drink inflation rose to 5.1 per cent in August, from 4.9 per cent in July, as shoppers continued to face higher prices for items at the till. It marks the fifth month in a row that the rate has increased.
ONS chief economist Grant Fitzner said: “The cost of airfares was the main downward driver this month with prices rising less than a year ago following the large increase in July linked to the timing of the summer holidays.
“This was offset by a rise in prices at the pump and the cost of hotel accommodation falling less than this time last year.
“Food price inflation climbed for the fifth consecutive month, with small increases seen across a range of vegetables, cheese and fish items.”
Chancellor Rachel Reeves said: “I know families are finding it tough and that for many the economy feels stuck. That’s why I’m determined to bring costs down and support people who are facing higher bills.
“Through our Plan for Change, we are taking action — raising the National Living Wage, extending the £3 bus fare cap, and expanding free school meals, to put more money in people’s pockets while we work to build a stronger, more stable economy that rewards hard work.”
The ONS also releases inflation data for CPI including owner occupiers’ housing costs (CPIH) – that measure of inflation sits at 4.1 per cent for the 12 months to August, down from 4.2 per cent a month earlier. CPIH is a more comprehensive measure of inflation which allows international comparisons to be drawn, though the UK tends to use CPI more frequently.
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Scott Gardner, investment strategist at Nutmeg, pointed out the signs within the data which suggested some positives for the future – but noted households would still be footing the bill for now.
“With forecasts suggesting inflation could rise even further in the short-term and hit 4% going into the autumn, the cost-of-living strain on household finances will persist in the months ahead. In short, already sticky inflation is likely to get stickier,” he said.
“While the headline rate remains elevated, there are some positives from this latest inflation reading. Closely watched core inflation fell during the 12-month period to August. Services inflation also showed good progress but there are signs that businesses continue to pass on their own cost increases. At the same time, for consumers, the energy price fall was offset by an increase in food prices, which continue to accelerate and punish many at the checkout.”
Derek Sprawling, head of money at Spring Savings, urged savers to protect their money by ensuring their bank’s interest rate was higher than the rate of inflation.
“While the inflation rate holding at 3.8% may appear stable, it still poses a challenge for savers. At this level, the real value of their money continues to be chipped away,” he explained.
“Now is not the time for complacency and savers should be proactive in reviewing their accounts. With many still earning minimal interest, switching to a savings product that offers a return above inflation is key to preserving financial wellbeing.”
