Business

UK's rate of inflation falls back to zero says ONS

Price falls at the petrol pumps have helped bring inflation down to zero in the UK

THE UK's inflation rate slipped back to zero last month as petrol price falls and muted rises for new fashion ranges kept a lid on the cost of living.

The Consumer Price Index (CPI) rate of inflation fell from 0.1 per cent in July after having hovered around zero since February.

And it means the Bank of England continues to face little pressure to raise interest rates, though some officials think underlying inflationary pressure is building as the economy recovers.

Inflation was pulled lower as the price of a litre of diesel fell by 6.2p and petrol by 2.4p, both more sharply than in the same period last year, according to the Office for National Statistics (ONS).

Meanwhile seasonal price rises in fashion and footwear stores were more muted, especially for women's clothing, also dragging on CPI.

Books were also cheaper, as were "cultural services" such as theatre and nightclub tickets.

Price rises for furniture and soft drinks partially offset the fall, though overall food and non-alcoholic beverages continued the record-breaking run of year-on-year falls.

It was the 14th month in a row of decreases in this sector, extending the longest on record since records began in 1989.

Meanwhile, a category including electricity and gas fuels fell 3.5 per cent, its biggest drop since March 2010, partly due to the effect of recent household gas price cuts, although the latest have yet to feed through.

Dr Esmond Birnie, PwC's chief economist in Northern Ireland, said: “It's exactly seven years today since the global financial storm broke with the collapse of Lehman Brothers and there remains considerable turbulence remains in the global economy that is impacting interest rates and fiscal policy in the UK.

“So in that context, today's date represent good news, particularly in terms of maintaining UK economic recovery."

He added: “Combined with the recovery in real wages low inflation is improving household incomes and is likely to continue across the UK, though to a lesser extent, here in Northern Ireland.

"Whilst a rise in Bank of England interest rates remains on the cards in the medium term, today's data suggest that a rise might be deferred until 2016.

“Nevertheless, the current period of stable prices is providing a boost to consumer spending power, and supporting the growth of the economy. This growth of domestic demand in the UK and western economies provides a counterweight to the slowdown we are seeing in China and some other emerging market economies."

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