UK inflation slumps as clothing and footwear retailers cut prices

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Falling prices at retailers for clothing and footwear and cheaper electronics helped push the annual rate of inflation in the UK down more than expected last month, from 2.5% to 2%, according to the official figures.

The return of traditional summer sales after last year’s hiatus caused by the coronavirus pandemic has been a factor in returning the government’s primary cost-of-living measure to its target rate, the Office for National Statistics (ONS).

Smaller discounts were offered in 2020 when retailers looked to maximize sales after the economy’s extended lockdown in the spring. The earlier easing of restrictions in 2021 resulted in a resumption of a more normal bargain pattern in July, although the 2% drop in the cost of clothing was lower than the discounts recorded in years before the crisis.

The ONS said there had also been a drop in the cost of recreation and culture, a category that includes computers, recording equipment, computer games, toys and package holidays.

The drop in consumer price inflation – the first since February – was larger than expected by economists polled by Reuters, who had forecast a drop to 2.3%. Core inflation, which excludes energy, food, tobacco and alcohol, fell from 2.3% to 1.8%.

The Bank of England estimates the respite will likely be temporary and forecasts an inflation rate of 4% by the end of the year.


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Separate ONS data for producer prices, measuring the cost of goods leaving factories, indicated that companies are being hit by higher fuel and raw material costs, paving the way for prices higher for consumers. Industry input prices rose 9.9% through July, up from 9.7% in June, while commodity prices rose 4.9%, from 4.5%.

The deputy national statistician for economic statistics at the ONS, Jonathan Athow, said: “Inflation fell in July for a wide range of goods and services, including clothing, which declined with the return of sales of summer after the pandemic hit the area last year. This was offset by a sharp increase in the price of used cars amid increased demand, following a shortage of new models.

“The different patterns of movement restrictions over the past two years have affected headline inflation. Part of this month’s decline is due to products and services, such as overseas travel, for which actual prices were used last year but had to be imputed this year.

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