Inflation accelerated to a five-month high in the United Kingdom in August as sharply higher fuel prices pushed transportation costs higher, according to the Office for National Statistics.
Why it matters: Consumer prices rose 0.5% in August, compared with a 0.3% increase in the same month last year. That pushed annual inflation to 3.1%, up from 2.9% in July and the highest rate since March.
Breaking it Down: Transportation was the biggest culprit. Prices in the category were 4.6% higher than a year earlier, accelerating from 3.6% in July, with motor fuels providing the largest upward contribution to the change in inflation.
- Petrol prices jumped 9.1 pence per litre between July and August, compared with an increase of just 0.3 pence during the same period last year. The average price reached 161.3 pence per litre, the highest since November 2022.
- Diesel prices also surged, climbing 14.2 pence during the month.
Good News: There was some better news underneath the headline number. Core CPI, which excludes energy, food, alcohol and tobacco, remained unchanged at 2.6%, while services inflation held steady at 3.4%.
- That suggests August’s acceleration was driven more by energy costs than a broad-based resurgence in underlying inflation.
The bottom line: Britain’s inflation problem worsened in August, but much of the damage came from surging fuel costs. With headline inflation back above 3%, however, elevated energy prices are making the Bank of England’s job increasingly difficult.