The Consumer Price Index (CPI) edged down to 0.0% in the year to August, from 0.1% in July.
The largest downward contribution to the change in the Consumer Price Index (CPI) 12-month rate between July and August came from clothing and footwear, where prices rose by less than last year. There are typically price rises for clothing and footwear in August as the sales season comes to an end, though this year the impact was less pronounced due to a lower level of discounting.
The transport category also made a downward contributed to the Consumer Price Index , with motor fuels falling by 12.9% in the year to August. Oil price deflation has been a key factor in constraining inflation over the past year. Following a brief surge in August, the global oil price has been falling in September and will continue to be a downward contributor to CPI in the coming months. Food prices also remain firmly entrenched in deflationary territory with overall food prices falling by 2.8% in the twelve months to August. We expect global food prices, which according to the UN fell by the biggest margin in 7 years in August, to continue to act as a drag on inflation over the near term.
Today’s figures confirm that inflationary pressures in the economy remain very subdued; even when we strip out food and fuel prices, inflation decelerated from 1.2% to 1.0% well below the Government’s target.
Overall, we believe the low inflationary environment will continue to provide a boost to household spending power and drive economic growth over the coming quarters.