In August as the effect of the Eat Out to Help Out scheme which ran from Monday to Wednesday, and offered 50 per cent off food up to the value of £10, pushed down the restaurant prices and July’s consumer Prices Index (CPI) inflation figure had been1 per cent. The VAT cut in the hospitality sector from 20 per cent to 5 per cent was also a factor according to the Office of National Statistics.
Low inflation is good for consumers and borrowers but can be sad for savers, as it affects the interest rates set by banks and other financial institutions.
“For the first time since records began, airfares fell in August as fewer people travelled abroad on holiday. Meanwhile, the using clothing price rises seen at this time of the year as autumn ranges hit the shops also failed to materialise. The cost of dining out fell significantly in August thanks to the Eat Out to Help Out scheme and VAT cut, leading to one of the largest falls in the annual inflation rate in recent years”, said ONS deputy national statistician Jonathan Athow. It was the lowest inflation rate since December 2015.
Inflation is calculated by looking at a basket of commonly purchased goods and comparing how much they cost to last month and to the same last year. During the pandemic, the ONS has been able to identify prices for many of the 720 items it usually monitors. In August, prices of only eight items were still unavailable, reflecting parts of the economy still unable to operate normally including cruises, live music, theatre, swimming pools, and soft play sessions according to ONS.