Business

Inflation holds steady as clothing sales offset higher energy and fuel prices

Inflation remained steady last month as higher prices for motor fuel, gas and electricity were offset by deeper discounting by clothing retailers
Inflation remained steady last month as higher prices for motor fuel, gas and electricity were offset by deeper discounting by clothing retailers Inflation remained steady last month as higher prices for motor fuel, gas and electricity were offset by deeper discounting by clothing retailers

INFLATION unexpectedly stalled last month as higher prices for motor fuel, gas and electricity were offset by deeper discounting by clothing retailers.

Figures from the Office for National Statistics (ONS) show the Consumer Prices Index (CPI) rate of inflation held steady at 2.4 per cent in June, unchanged from a month earlier.

Economists were expecting inflation to rise to 2.6 per cent.

ONS head of inflation Mike Hardie said: "Consumers have been feeling the benefit of the summer clothing sales, and computer game prices have also fallen.

"However, gas and electricity and petrol prices all rose, with consumers seeing the highest price at the pump for nearly four years, with inflation remaining steady overall."

A recent jump in oil prices has raised the price of motor fuel, with petrol rising 2.7p per litre on the month to 128p per litre, while diesel rose 2.9p to 132.1p.

It marks the highest level for both petrol and diesel since September 2014.

Households were also squeezed by gas and electricity costs, which rose 2.5 per cent and 2.2 per cent respectively, month on month.

Some relief, however emerged for consumers on the high street, where clothing discounts - most strongly felt in men's apparel - left more cash in shoppers' wallets.

Prices usually fall between May and June as summer sales get under way, but the 2.3 per cent drop this year compares with a 1.1 per cent fall a year ago, and is the largest decline during the same period since 2012.

There was also a drop in the prices of games, toys and hobbies, particularly in the cost of computer games.

It helped prices for recreation and culture drop 0.4 per cent between May and June this year, though the statistics agency noted that prices for computer games are heavily dependent on the make-up of bestseller charts, leading to significant fluctuations from month to month.

Food prices eased by 0.6 per cent, due primarily to a drop in fruit prices and a category that includes syrup, sugar, jam, chocolate and confectionery, for which prices fell 1.1 per cent and 1.3 per cent respectively.

Vegetables also fell 0.9 per cent.

Danske Bank chief economist, Conor Lambe said there are currently two opposing forces influencing the inflation rate.

"The impact of the post-referendum sterling depreciation is gradually fading, which is exerting downward pressure on the inflation rate. However, there is upward pressure coming from higher oil prices.

“That being the case, the numbers could fluctuate a little over the next few months but the annual rate of inflation for 2018 as a whole is expected to be lower than observed last year.”

The Retail Prices Index (RPI), a separate measure of inflation, was 3.4 per cent last month, up from 3.3 per cent in May.

The Consumer Prices Index including owner-occupiers' housing costs (CPIH) - the ONS's preferred measure of inflation - was 2.3 per cent in June, in line with May's reading.