Business

Fall in fuel prices keeps inflation rate at 2.6%

Fuel prices fell by 1.3 per cent between June and July according to the latest figures
Gareth McKeown

IN an unexpected development the UK's inflation rate remained unchanged last month after another price fall at the fuel pumps.

The Consumer Price Index (CPI) measure of inflation was forecast to reach 2.7 per cent last month, up from 2.6 per cent in June, according to consensus figures, but it has held steady.

The pause comes as CPI slipped back to 2.6 per cent in June after soaring to a near four-year high at 2.9 per cent in May.

The Office for National Statistics (ONS), who publish the figures, said the main downward impact on the cost of living last month came from a drop in fuel prices, which sank by 1.3 per cent between June and July after growing by 0.7 per cent over the period in 2016.

Petrol fell by 1.4p month on month to 113.9p per litre, while diesel slipped by 1.7p to 115.6p per litre.

The decline was countered by food prices notching 0.1 per cent higher on the month in July following a fall of 0.2 per cent over the period last year.

It was largely driven by meat and other items such as sauces, which became more expensive, the ONS said.

Clothing and utility bills were also putting upward pressure on CPI, with electricity, gas and other fuels lifting 0.8 per cent between June and July after flat growth over the period in 2016.

The Bank of England expects CPI inflation to peak at 3 per cent by the autumn of this year and has signalled it is no hurry to hike interest rates from record lows of 0.25 per cent.

Meanwhile the separate Retail Price Index (RPI) measure of inflation which the UK government uses to calculate the rise in regulated rail fares, rose to 3.6 per cent last month, from 3.5 per cent in June.

The outcome puts millions of passengers in England, Wales and to a lesser extent Scotland on course for largest increase in fares since 2013 when price changes come into force in the new year.

At this stage there are no plans for increases in Northern Ireland.

Trade union Unite said the households are continuing to feel the squeeze.

“Although inflation has remained stable it is still far outstripping increases in wages, meaning that workers are getting poorer," general secretary Len McCluskey said.

"The problem is more acute than the official figures as the real cost of living is shown in the RPI figure which is significantly higher than the official CPI level, the measurement used for wages.The UK now has horrific levels of personal debt as people borrow to get by. This is a sure sign that all is not well in our economy."

Enjoy reading the Irish News?

Subscribe now to get full access

Business