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UK inflation drops in August on falling transport costs

Dan Jones
Written By:
Dan Jones
Posted:
Updated:
05/12/2014

UK inflation fell from 2.8% to 2.7% in August, in line with economists’ expectations, as falling transport costs pushed the headline figure down.

The Office for National Statistics (ONS) said the fall was attributable to smaller rises in the price of both petrol and airline costs compared with those seen in August 2012.

RPI inflation, however, rose slightly more than expected to 3.3%, up from 3.1% in July.

RPIJ, the ONS’ ‘improved measure’ of RPI, remained constant at 2.6%, while core inflation held steady at 2%.

The other main inflation measure was also unchanged between July and August, with CPIH (CPI including housing costs) constant at 2.5%.

“These latest numbers continue the trend of broadly steady inflation seen since spring 2012,” the ONS said.

This change in inflation leaves UK households collectively needing to find an extra £17.7bn a year to maintain their standard of living enjoyed 12 months ago, according to MGM Advantage, the retirement income specialist.

Each household will typically need to spend an extra £679 a year to maintain their standard of living from just one year ago.

Aston Goodey of MGM Advantage said: “The inflation yo-yo is wreaking havoc with household finances, as every week people are feeling the pinch as they fill their cars with fuel and put food on the table. Higher prices for everyday essentials mean many people are finding it increasingly difficult to make ends meet, and in an era of stagnant wage rises, making cut backs where they can in order to balance the weekly budget.

“For people on fixed incomes, including retirees, inflation can have a long and lasting effect on budgets and lifestyles. There is no simple answer, with people approaching retirement and looking to convert pension savings into an income stuck between a rock and a hard place. With annuity rates at near historical lows, and inflation remaining broadly steady, the need to look at alternatives has never been clearer.”