UK inflation falls back to zero per cent

With a Bank of England target of around 2% once again being missed, the latest figures show that the UK economy's inflation level has fallen back down to zero.

Sharp falls in both petrol and diesel prices played a major role, although they were not the only significant factors.

Crude oil

The world wide fall in crude oil prices has been trickling down to reduce household costs in the UK, and recent sharp falls in fuel prices on the forecourts has played a big part in the new inflationary low.

However, the ongoing supermarket price war, together with cheaper clothes prices, have had the effect of boosting consumer spending as people find they are effectively having a wage rise in real terms for the first time in a long time.

Consumer prices index

The level of inflation on the consumer prices index dropped to 0% in August, falling from 0.1% in July. This essentially means that living costs are exactly the same as they were a year ago.

The new set of official figures confirms that inflation has been below the BoE's target of 2% for 20 months.

Scott Corfe at the Centre for Economics and Business Research think tank commented: “This period of noflation or lowflation – whatever you want to call it – has undoubtedly been good news for the UK. The falling price of essentials has come at the same time as a rapid acceleration in wage growth since the start of the year, boosting discretionary spending power.”