The Consumer Prices Index (CPI) was to 1.6% in August down from 1.8% in July. The factors that contributed most to the downward effect were gas and electricity. Prices in both sectors changed little or not at all this year but rose significantly last year. Another large effect cam from food and non-alcoholic beverages. Food prices were the main factor where prices decreased at their fastest rate for this time of year since 2000. Within the food segment the main factors were fruit, bread, cereals, vegetables and meat.
The largest upward contributor was transport where fuel price rises between July and August and price decreases at record levels last year created the upward effect. Another factor in the transport sector that made a difference was second hand car sales. Prices rose at their fastest ever for this period but fell this time last year. A downward contribution from an increase in fares in European air travel partially offset the trend. The RPI was 1.3%.
The Government target for inflation is 2% in order to maintain economic stability. It is not trying to get the lowest possible rate of inflation. As stability is the aim fluctuations below the target are as unwanted as those above it. The figure of 2% is a figure aimed at by most of the economies around the world. The UK statistics compare well to those for the US and the EU as a whole.
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