UK consumer price index growth accelerated sharply in August

According to the report from the Office for National Statistics, the Consumer Prices Index (CPI) rose by 3.2% in the 12 months to August 2021, up from 2.0% in July: the increase of 1.2 percentage points is the largest ever recorded increase in the CPI National Statistic 12-month inflation rate series, which began in January 1997; this is likely to be a temporary change. Economists had expected a 2.9% increase.

On a monthly basis, CPI increased 0.7% in August 2021, compared with a fall of 0.4% in August 2020. Economists had expected a 0.5% increase.

The Consumer Prices Index including owner occupiers' housing costs (CPIH) rose by 3.0% in the 12 months to August 2021, up from 2.1% in the 12 months to July.

The increase of 0.9 percentage points is the largest increase ever recorded in the CPIH National Statistic 12-month inflation rate series, which began in January 2006; however, this is likely to be a temporary change.

The largest upward contribution to change is a base effect, because, in part, of discounted restaurant and café prices in August 2020 resulting from the government's Eat Out to Help Out scheme and, to a lesser extent, reductions in Value Added Tax (VAT) across the same sector.

The largest upward contribution to the August 2021 CPIH 12-month inflation rate came from transport (0.87 percentage points) with further large upward contributions from restaurants and hotels (0.65 percentage points), housing and household services (0.65 percentage points), and recreation and culture (0.28 percentage points).

CPIH increased by 0.6% on the month in August 2021, compared with a fall of 0.3% in August 2020.

Restaurants and hotels, recreation and culture, and food and non-alcoholic beverages made the largest upward contributions to the change in the CPIH 12-month inflation rate between July and August 2021.