Fall in inflation driven by slowing food prices

A surprise fall in inflation last month was driven by food prices falling by less in August 2023 than a year ago.

The Consumer Price Index rose by 6.7% in the 12 months to August 2023, down from 6.8% in July and is the third consecutive month that the figure has dropped, according to the Office for National Statistics (ONS).

The slight easing in the annual inflation rates in August 2023 principally reflected offsetting contributions across six divisions. Large downward effects from restaurants and hotels, food and non-alcoholic beverages, recreation and culture, and furniture and household goods were partially offset by upward contributions from transport, and housing and household services.

Food and non-alcoholic beverages prices rose by 0.3% between July and August 2023, compared with a rise of 1.5% between the same two months in 2022. This resulted in an easing in the annual rate to 13.6% in August 2023, down from 14.9% in July and a recent high of 19.2% in March this year, which was the highest annual rate seen for over 45 years.

The easing in the annual rate for food and non-alcoholic beverages between July and August this year was driven by relatively small price movements from seven of the 11 detailed classes. The largest downward contributions came from the milk, cheese and eggs, vegetables, and fish categories.

The overall price of vegetables fell between July and August 2023, compared with a price rise between the same two months of 2022. As a result, the annual rate eased from 16.7% in July to 14.0% in August 2023.

Similarly, fish prices fell this year but rose a year ago, leading to a slowing in the annual rate from 13.4% in July to 6.8% in August 2023. The effect came from across the range of fresh, chilled, frozen and processed fish and seafood.

ONS Chief Economist Grant Fitzner said: “The rate of inflation eased slightly this month driven by falls in the often-erratic cost of overnight accommodation and air fares, as well as food prices rising by less than the same time last year.

“This was partially offset by an increase in the price of petrol and diesel compared with a steep decline at this time last year, following record prices seen in July 2022.

“Core inflation has slowed this month by more than the headline rate, driven by lower services prices.”