UK inflation falls back to zero in August

Jessica Morris
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Lower prices have been helping consumers who've seen their spending power swell (Source: Getty)

The UK slipped back into the land of "noflation" last month, amid falling petrol prices and a smaller seasonal increase in clothing prices than last year, according to data released today by the Office for National Statistics.

Britain's consumer price index fell to zero in the year to August, from 0.1 per cent a month earlier, in line with economists expectations.

Core inflation, which strips out more volatile sectors such as energy and food, fell from 1.2 per cent to one per cent during this period.

Inflation first fell to zero in February, and it's been hovering around this mark ever since.

While it's not always seen as a positive thing, lower prices have been helping consumers who've seen their spending power swell. Economists expect official data due out tomorrow to show how average weekly wages, excluding bonuses, rose at the fastest rate in more than six years during the three months to July.

"Pleasing news for consumers as their purchasing power benefited from consumer price inflation being flat year-on-year in August," Howard Archer, chief economist at IHS, said.

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Others added that low inflation will continue to benefit the UK economy more generally.

"Low inflation is the Bank of England’s trump card in coping with the effects of weakness in China and choppy equity markets," Ian Stewart, chief economist at Deloitte, said.

Michael Martins, economic analyst at the Institute of Directors (IoD) added: "With low unemployment, one of the highest levels of vacancies since 2001, and strong domestic growth, the UK economy continues to look healthy. This is despite economic uncertainty and shaky confidence in some of the UK’s largest trading partners, notably China and the Eurozone."

Threadneedle Street expects inflation to remain close to zero for a few more months, before picking up around the turn of the year. At the same time, some of its officials have warned inflation could rise more sharply than the Bank's current forecasts.

"With consumer price inflation flat in August and core inflation easing back to 1.0 per cent, there is little immediate pressure on the Bank of England to start raising interest rates," Archer said.

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