UK inflation eases slightly in August The UK's annual inflation rate slowed slightly last month in spite of rising petrol prices, official statistics show. Inflation measured by the consumer price index dropped from 2.6 per cent in July to 2.5 per cent in August, in line with economists" expectations. Inflation in the UK has fallen rapidly from its peak of 5.2 per cent last September but its decline stopped unexpectedly over the summer as global commodity prices started to rise. David Tinsley, an economist at BNP Paribas, said the data would ease fears that inflation was set to accelerate again. "While it is certainly the case that compared to a few months ago the near-term outlook for inflation is firmer, most of that firming looks to be coming from higher energy and food prices," he said. Core inflation is back at 2.1 per cent, the level it was at in June, and there is little reason to see underlying inflation as anything but contained. The slight fall in the inflation rate was driven by smaller price rises than last year for furniture, carpets and other household goods. Gas and electricity bills also rose at a slower rate than a year ago. However, petrol prices rose 3.5p per litre between July and August compared with a rise of 0.9p per litre in the same period last year. Inflation measured by the alternative retail price index, which takes into account a measure of housing costs, fell from 3.2 per cent in July to 2.9 per cent in August. Chris Williamson, an economist at Markit, a data provider, noted inflation was still running ahead of wage growth of about 1.5 per cent, eroding people's real incomes. "That squeeze is nothing like as severe as the 3 per cent-plus rate at which real incomes were falling throughout much of last year, reflecting the steep drop in inflation from its 5.2 per cent peak last September," he said. It nevertheless "still represents a fall in spending power and hit to real living standards which will dampen consumer spending and limit the economy's potential for recovery if it persists."