–Aug CPI +0.6% m/m; +4.5% y/y vs Jul 4.4% y/y; in-line with median
–Aug core CPI +0.7% m/m; +3.1% y/y vs Jul 3.1% y/y; above median
–Aug RPI +0.6% m/m; +5.2% y/y; Aug RPIX +0.6% m/m; +5.3% y/y

LONDON (MNI) – Consumer price inflation rose to its highest level
in three months in August as the price of clothing and footwear
increased at its fastest monthly pace on record, according to figures
released by National Statistics Tuesday.

Consumer prices increased by 0.6% on the month in August taking
inflation up to 4.5% compared with 4.4% in July, the highest since May,
but in-line with the median forecast from economists.

Between July and August, consumer prices were boosted by a record
3.7% monthly increase in clothing and footwear prices. National
Statistics said that it was normal for prices to rise in August
following the summer discounting period, but that this month the
bounceback had been stronger than usual. It was possible that the rising
cost of materials such as cotton had put upward pressure on prices.

There was also upward pressure on the monthly change in the CPI
from transport where airfares rose 11.2% between July and August.

In spite of the high level of inflation, which remains more than
twice the target rate of 2%, economists expect the Bank of England to
keep policy on hold, with some forecasting that the central bank could
embark on a new round of Quantitative Easing should growth weaken
further.

In the August Inflation Report, the BOE said that there is a
good chance that inflation would reach 5% later this year, “boosted by
utility price rises, and reflecting the continuing impact from past
increases in VAT and in oil and other import prices.”

Core CPI inflation, a much watched gauge of underlying inflationary
pressures, held steady at 3.1% in August.

The Retail Prices Index, which used to be the key index for gauging
inflationary pressure in the economy, rose 0.6% on the month and was
up 5.2% on the year.

Excluding mortgage interest payments, RPIX rose 0.5% on the month
and 5.3% on the year.

–London bureau: 0044 20 7862 7491; email: drobinson@marketnews.com

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