UK inflation drops more than expected in July

Official data, which came out yesterday showed that British inflation eased more than expected in July after hitting a five-month high in June.

Consumer prices increased 1.6% on the year in July whereas many economists had expected inflation to fall to 1.8% the Office for National Statistics (ONS) said. The ONS added that “compared with the previous month, the consumer price index was down 0.3%”.

Separate data from the ONS showed house prices in Britain rose 10.2% in June, adding to signs from other surveys that the rapid pace of house price growth is starting to moderate. As ever, growth in property prices continued to be led by London where they rose 19.3%.

Until December 2013, annual inflation exceeded the Bank of England’s 2% every month since December 2009, eroding the spending power of households and making the fall in living standards a big political issue ahead of next year’s general election.

That has helped the Bank of England to hold off on raising interest rates despite Britain’s surprisingly strong economic recovery.

The Office for National Statistics said the biggest negative contribution to inflation in June was clothing and footwear.

The ONS said consumer price inflation for the second quarter as a whole was 1.7%.