LONDON (AP) – Inflation in the United Kingdom (UK) slowed slightly last month as a drop in gasoline and diesel fuel prices gave consumers the first glimmer of hope that Britain’s cost-of-living crisis may be beginning to ease.
The consumer price index (CPI) rose 9.9 per cent in the 12 months through August, the Office for National Statistics said yesterday. That’s down from the 40-year high of 10.1 per cent reported last month and was lower than economists’ expectations of 10 per cent.
Britain has been hard hit by worldwide price shocks triggered by the war in Ukraine, with consumer prices rising at a faster pace than other major economies over the past year.
Lower gasoline costs also slowed United States (US) inflation for a second straight month in August, but consumer prices that jumped 8.3 per cent from a year earlier were still painfully high – much like in the UK.
British Prime Minister Liz Truss last week moved to ease the pain, announcing a cap on household gas and electricity prices to head off an 80 per cent increase in home energy costs this winter. Before that announcement, the Bank of England had estimated that inflation would peak at 13.1 per cent later this year and trigger a recession.
“The headline rate of CPI inflation fell in August for the first time since last September and now looks set to drop sharply next year, thanks partly to the government’s energy price cap,” said Chief UK Economist for Pantheon Macroeconomics Samuel Tombs.
Tombs estimates that the inflation rate will now peak at around 11 per cent next month and may drop to the Bank of England’s two per cent target by the end of next year. The bank postponed its upcoming meeting until next week to honour the mourning period for Queen Elizabeth II, and it’s expected to carry out another interest rate hike to tame inflation like other central banks around the world.
Gasoline prices fell 7.5 per cent, to 175.2 pence (USD2.01) a litre, in August as oil prices dropped on international markets, the statistics office said. While the decline brought welcome relief to drivers, the cost of fuel is still 32 per cent higher than it was a year ago.
Similarly, in the US, the average cost of a gallon of gasoline has dropped to USD3.71, down from just above USD5 in mid-June.
But there was no relief on other energy costs in the UK Electricity prices rose 54 per cent in the period, and natural gas prices rose almost 96 per cent.
At the grocery store, a jump in the cost of milk, cheese and eggs drove food prices up 13.1 per cent in the year through August, the statistics office said.
