Inflation in the UK eased slightly in August, falling to an annual rate of 9.9% from 10.1% in July, easing the pressure on households somewhat – but remained close to the highest rate in 40 years.
Inflation eased because of a monthly fall in petrol and diesel prices while food and clothing became more expensive. Economists had expected a further small rise to 10.2% in the headline rate.
Prices rose by 0.5% in August from July, according to the Office for National Statistics. It said: “Food and non-alcoholic beverages made the largest upward contribution to the monthly rates in August 2022, while falling prices for motor fuels resulted in a large offsetting downward contribution.”
Jamie Durham, economist at PwC UK, explained: “This data shows that there was still plenty of momentum in the market in July, despite the weakening economic outlook, with average prices up £6,000 between June and July. However, there have been some signs of a slowdown over the last couple of months in more timely data. Mortgage approvals have now dropped below historical averages and agents are reporting fewer new buyer enquiries.
“Looking forward, we do expect price growth to slow over the coming months as households look again at what they can afford and whether now is the time to buy. At this point, however, we are not expecting a significant decline in prices because while demand is likely to soften there is still a shortage of properties on the market.
“Last week’s appointment of a new Prime Minister and the announcement of the £2,500 energy price cap is likely to improve consumer confidence and ease the pressure on households, which may mean the housing market performs better than would otherwise have been the case.”