British consumer price inflation slowed less than expected in August as transport costs rose, partly offsetting a downward impact from utility bills and food prices, official data showed today.
The Office for National Statistics said consumer prices rose 0.4 per cent on the month to give an annual reading of 1.6 per cent. That was the lowest reading since January 2005, but above analysts' expectations for a sharper easing to 1.4 per cent.
The Retail Price Inflation price gauge, which includes housing costs and is used as a benchmark for pay deals, rose more than twice as fast as expected on the month, by 0.5 per cent, taking the annual rate to -1.3 per cent from -1.4 per cent in July, and confounding expectations for an easing to -1.5 per cent.
Inflation has fallen more slowly in Britain than in other countries, where annual CPI has already turned negative, but policymakers reckon the large amount of spare capacity built up during the recession will bear down on prices for some time to come.
The ONS said the largest downward impact on consumer price inflation came from gas and electricity bills, which were unchanged this year but rose sharply a year ago.
There was also downward pressure from food prices, which showed their biggest fall for a month of August since 2000, but rose by 1.4 per cent on the month last August.
The biggest upward contribution to inflation came from transport, which rose on the month, having fallen at a record monthly pace in August last year.
There was also a large upward contribution from the price of second hand cars.
Annual services inflation slowed to 2.9 per cent from 3.1 per cent in July, the slowest rate since August 2006.
Reuters