Annual CPI eases to 3.1% in July

THE OFFICE for National Statistics said today CPI annual inflation – the Government’s target measure – was 3.1% in July, down from 3.2% in June.

Transport costs produced the largest downward pressure to the change in CPI inflation between June and July. This was mainly due to the price of second-hand cars falling between June and July this year but rising over the same period a year ago; the price increase of 3% last year was a record for a June to July period.

There was also a downward effect from petrol with prices falling by 0.7p per litre between June and July this year but rising by 1.1p per litre a year ago.

Despite today’s fall, the Birmingham Chamber of Commerce said a double dip recession could not be ruled out.

Will Rogers, BCI policy adviser, said: “The cost of living is being pushed higher by increased energy costs, rising food prices and the return of VAT to 17.5%, from 15% a year ago.

“Unemployment did fall last week but there is no doubt that the economy remains extremely fragile, and it is likely unemployment figures will rise owing to public sector cuts.

“A double dip recession cannot be ruled out as growth is likely to be tempered by the continuing fiscal consolidation and the persistence of tight credit conditions.”

He said the forthcoming increase in the standard rate of VAT to 20% would fuel inflation throughout 2011, while high food and petrol prices would also continue to play a part.

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