Inflation dips to 2.8% on falling air fares

The rate of consumer price inflation fell to 2.8 per cent last month, from 2.9 per cent in June, the Office for National Statistics (ONS) said today.

The ONS said the biggest contributor to the fall came from lower air fares, along with reduced prices for clothing and footwear and recreation and culture.

An increase in petrol and diesel prices partly offset these reductions, the official figures showed.

Although inflation remains above the UK government’s 2 per cent target, Howard Archer, chief UK and European economist at IHS Global Insight, said the dip would ease the squeeze on consumers’ purchasing power.

However, he pointed out that prices are still rising almost three times as quickly as earnings, which grew 1 per cent in the three months to May.

Archer added: “Our best bet is that consumer price inflation will dip to 2.7 per cent by the end of 2013 and then trend down further to end 2014 just above 2 per cent.”