Britain's inflation slows to 1.3%

INFLATION fell for a second consecutive month in August, with the consumer prices index showing a year-on-year rise of 1.3% down from 1.4% in July. The City had expected the rate to hold steady.

The figures, which add to recent reports of a sharp slowdown in High Street sales, will be closely watched by economists who have been predicting a further quarter-point rise in the Bank of England base rate before the end of the year. A slowdown in inflation will ease the pressure for a hike.

A rate of 1.3% remains safely below the Bank's 2% target. Economists say the increase in the base rate from 3.5% to 4.75% in the past year has been targeted more at cooling the UK's booming property market rather than fighting inflation. Recent house price surveys suggest the medicine is beginning to work. Lender Halifax says values fell 0.6% in August.

The ONS said the largest downward effect on inflation came from clothing and footwear. Prices fell 5.7%, the steepest fall since December 2002.

'This August, both adults' and children's clothing experienced weaker recoveries and more special offers than in the same month a year earlier,' it said. There was also a slide in the prices of toys and computer games.

Despite cooling price rises as measured by the CPI, the Government's previous measure of inflation, the retail prices index (RPI) showed the annual rate rise from 3% to 3.2%.

RPI, excluding mortgage payments, was unchanged at 2.2%.

CPI annual rate of inflation
August - 1.3%
July - 1.4%
June - 1.6%
May - 1.5%
April - 1.2%
March - 1.1%

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