CPI drops to lowest level since February 2005

Consumer Price Index (CPI) annual inflation dropped to 1.6% in August, down from 1.8% in July.

The drop puts the figure at its lowest since February 2005, as housing and household services and food and non-alcoholic beverages both exerted strong downwards pressure on the index. Food in particular proved a drag on inflation, with prices decreasing at their fastest pace for a July to August rate since 2000.

Transport provided the main upward contribution to the index with fuel price rises combining with increased purchases of second hand cars, largely attributed to the government’s scrappage scheme.

The Retail Price Index (RPI) fell by 1.3% over the month, compared with a fall of 1.4% in July.