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MNI BRIEF:  UK CPI Surges To Near Decade High On Base Effects

MNI (London)
(MNI) London

Base effects from UK's 2020 Eat Out To Help Out scheme help push inflation to multi-year high.

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UK consumer price inflation surged to an annual rate of 3.2% in August, up from 2.0% in July. That's the highest outturn since March 2012, and the biggest single month change in in the annual rate since the series began in January 1997.

The restaurant and hotel sector accounted for 0.69 percentage points of the change in CPI, with prices in the sector depressed in August of 2020 by the Eat Out to Help Out scheme and reduced VAT payments. ONS economists estimate that the falling away of the EOHO programme alone contributed to 0.4pp of the total rise, but noted some unrelated price increases in the sector last month. The extreme distortion of the EOHO scheme overshadowed the broad-based nature of the jump in inflation. However, ONS official did stress that the statistical agency does "expect this [month's large rise] to be a temporary effect."

Second-had car prices rose by 4.9% between July and August, or by 18.3% at an annual pace, contributing another 0.06 percentage points to the change in CPI. With a shortage of computer chips limited the supply of new cars, used-car prices could continue to lift inflation in the months to come.