Headline inflation rate declines

Official consumer price statistics have revealed a further fall in the UK headline rate of inflation, although the latest data also showed fresh signs of stickiness in terms of core inflation.

Figures released last month by ONS showed that the Consumer Prices Index (CPI) 12-month rate – which compares prices in the current month with the same period a year earlier – stood at 6.8% in July. While this was sharply lower than the previous month’s figure of 7.9%, the drop was exactly in line with forecasts.

ONS noted that falling gas and electricity prices had largely driven the decline as a change to the energy price cap came into force. Price rises for some staple food items including milk, butter, bread, eggs, cereal and fish also eased, although these dips were partially offset by a further rise in the cost of eating out, as well as a jump in flight, alcohol and tobacco prices.

Core CPI inflation, which excludes volatile elements such as energy, food, alcohol and tobacco, however, failed to fall. July’s figure of 6.9% was unchanged from the previous month and slightly higher than the consensus prediction from the Reuters poll.