- Unexpected Drop in UK Unemployment Rate
- Lower Inflation Rate Surprises Economists
- Factors Contributing to Reduced Inflation Rate
The ONS says that multiple factors lowered the unemployment rate last month, despite forecasters’ projections of a rise above 7%.
The inflation rate has decreased to 6.7%, contrary to economists’ predictions that it would rise.
The Office for National Statistics (ONS) reported that the consumer prices index (CPI) measure slowed in the 12 months to August, from the 6.8% figure reported the previous month, due to food prices increasing at a slower rate in August 2022 than in August 2022.
The rate of price growth in the economy, which has slowed from a peak of 11.1% less than a year ago, has been put under the most pressure by soaring global oil prices, which are being felt throughout the economy but most visibly at petrol stations.
The Bank of England and economists had predicted that inflation would rise to 7.1%.
At 6.7%, the rate of inflation is its slowest since February 2022.
Food and non-alcoholic beverage prices rose at a reduced annual rate of 13.6% in August compared to 14.4% in July. This was a significant factor in the decline.
Motor petroleum prices rose 0.2% in July and August 2023, compared to 1.2% in 2022, according to the ONS.
The Bank monitors core inflation, which eliminates volatile variables like food and energy prices, and expected it to remain stable.
However, the ONS reported a significant decrease in core inflation from 6.9% to 6.2%.
The adjustment will show the Bank’s rate-setters that its 14 straight interest rate hikes to dampen economic demand are working.
Before inflation data, most economists and financial markets expected the Bank to hike rates 0.25 percentage points on Thursday.
The brighter outlook for inflation now casts doubt on whether an increase is assured, giving optimism to hard-pressed borrowers such as mortgage holders whose payments have risen during the current cost of living crisis.
Refinitiv reports that market players now see a 50/50 chance of the Bank rate remaining steady.
As the pound fell against both the dollar and the euro, diminished rate hike expectations were also evident.
ONS chief economist Grant Fitzner commented on the latest data, stating, “The rate of inflation eased marginally this month due to declines in the often-volatile cost of overnight accommodations and airfares, as well as food prices rising by less than the same time last year.
“This was partially offset by an increase in the price of petrol and diesel compared to a steep decline at the same time last year, which followed record prices in July 2022.”
The core rate of inflation has slowed more than the headline rate this month, due to falling service prices.
