UK inflation dips slightly in August

LONDON (AP) — U.K. inflation slowed slightly in August as a drop in gasoline and diesel fuel prices gave consumers the first glimmer of hope that Britain’s cost-of-living crisis may be beginning to ease.

The consumer price index rose 9.9% in the 12 months through August, the Office for National Statistics said Wednesday. That’s down from the 40-year-high of 10.1% reported last month and was lower than economist expectations of 10%.

Britain has been hard hit by worldwide price shocks triggered by the war in Ukraine, with U.K. consumer prices rising faster than other major economies over the past year.

Prime Minister Liz Truss last week moved to ease the pain, announcing a cap on household gas and electricity prices to head off an 80% increase in home energy costs this winter. Before that announcement, the Bank of England had estimated that inflation would peak at 13.1% later this year.

“The headline rate of CPI inflation fell in August for the first time since last September and now looks set to drop sharply next year, thanks partly to the government’s energy price cap,” said Samuel Tombs, chief U.K. economist for Pantheon Macroeconomics.

Tombs estimates that the inflation rate will now peak at around 11% next month and may drop to the Bank of England’s 2% target by the end of next year.

Gasoline prices fell 7.5% to 175.2 pence ($2.01) a liter in August as oil prices dropped on international markets, the ONS said. While the decline brought welcome relief to motorists, the cost of fuel is still 32% higher than it was a year ago.

But there was no relief at the grocery store. A jump in the cost of milk, cheese and eggs drove food prices up 13.1% in the year through August, the ONS said.

Electricity prices rose 54% in the period and natural gas prices rose almost 96%.