Increase in UK inflation in August

Consumer Prices Index annual inflation rose to 2.5% in August, an increase from 2.4% in July, according to the latest figures from the Office of National Statistics.

The largest upward effect came from recreation and culture, with prices for games, toys and hobbies increasing by a greater amount this August than last year, with the main upward contribution coming from computer games.

The ONS also reported a small upward effect from equipment for sport and open-air recreation, where prices overall increased this year, but fell a year ago.

Other large upward effects came from furniture and furnishings, particularly bedroom furniture, where prices rose this year, largely due to recoveries from sales; materials for maintenance and repair of the dwelling, where prices increased in August; and clothing and footwear, where prices rose by more than a year ago, following the summer sales and the introduction of higher priced replacement stock.

Transport provided the only large downward contribution to the change in the CPI annual rate, where the average price of petrol rose by less than last year to reach 97.5p on August 15, while air fares for international travel increased by less than a year ago.

RPI inflation - which includes mortgage interest payments - also increased, rising to 3.4% in August, from 3.3% in July.

The government's target for inflation is 2%. Last month, Bank of England governor Mervyn King warned that inflation could increase to 3% over the next six months. Analysts have warned that the latest figures could lead to a further rise in interest rates.

(KMcA)