Surprise as inflation holds steady

Inflation unexpectedly stalled last month as higher prices for motor fuel, gas and electricity were offset by deeper discounting by clothing retailers.

Inflation stalled despite higher prices at the pump. Picture: Contributed
Inflation stalled despite higher prices at the pump. Picture: Contributed

Figures from the Office for National Statistics (ONS) show the consumer prices index (CPI) rate of inflation held steady at 2.4 per cent in June, unchanged from a month earlier. Economists were expecting inflation to rise to 2.6 per cent.

ONS head of inflation Mike Hardie said: “Consumers have been feeling the benefit of the summer clothing sales, and computer game prices have also fallen.

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“However, gas and electricity and petrol prices all rose, with consumers seeing the highest price at the pump for nearly four years, with inflation remaining steady overall.”

The pound dropped sharply after the inflation data, falling 0.7 per cent against the dollar at $1.30 and was 0.3 per cent lower at €1.12.

A recent jump in oil prices has raised the price of motor fuel, with petrol rising 2.7p per litre on the month to 128p per litre, while diesel rose 2.9p to 132.1p. It marks the highest level for both petrol and diesel since September 2014.

Households were also squeezed by gas and electricity costs, which rose 2.5 per cent and 2.2 per cent respectively, month-on-month.

But some relief emerged for consumers on the high street, where clothing discounts – most strongly felt in men’s apparel – left more cash in shoppers’ wallets.

Prices usually fall between May and June as summer sales get under way, but the 2.3 per cent drop this year compares with a 1.1 per cent fall a year ago, and is the largest decline during the same period since 2012.

There was also a drop in the prices of games, toys and hobbies, particularly in the cost of computer games.

The retail prices index (RPI), a separate measure of inflation, was 3.4 per cent last month, up from 3.3 per cent in May.