Inflation surprise as computer game prices drop

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Inflation growth slowed sharply in August to 1.7% after computer game prices dropped and clothing prices were slow to recover from the summer sales.

The Consumer Prices Index measure of inflation fell below 2.1% in July, according to the Office for National Statistics.

It is the lowest rate since late 2016.

As well as the falling cost of computer games, the ONS said clothing prices rose “less than last year after the end of the summer sales”.

The surprise slowdown in inflation growth sent the pound 0.41% lower against the dollar to $1.2450.

The fall should also benefit households, pushing wage growth further above the rate of inflation. Recent figures showed that pay, excluding bonuses, increased by 3.8% between May and July.

Analysts said the fall was unlikely to have any impact on interest rates.

The Bank of England’s Monetary Policy Committee (MPC) is holding its two-day meeting to decide on interest rates on Thursday.

Pantheon Macroeconomics chief UK economist Samuel Tombs said: “The chance that the MPC follows other central banks and cuts bank rate this year remains slim, despite the sharp fall in CPI inflation in August.”

The statistics agency said prices for “recreation and culture” fell by 5% between July and August, particularly because of drops in prices for computer games, including downloads.

It said: “Price movements for games can often be relatively large, depending on the composition of bestseller charts.”

Meanwhile price increases in clothing and footwear slowed, rising by 1.8%, compared with a 3.1% increase a year ago.

The ONS said prices usually increased around this time of year as autumn ranges started to enter shops. But it said the smaller increase this year “may have been influenced by the proportion of items on sale”.