UK inflation plummets from 1% to 0.2% as cost of clothes and restaurant prices drop

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THE Consumer Prices Index (CPI) rate of inflation plunged to 0.2% in August from 1% in July due to falling clothing and restaurant prices.

Eat Out to Help Out is the main reason for the drop as it resulted in people spending less cash in restaurant and cafes compared to the same month last year, according to the Office for National Statistics (ONS).

Inflation has fallen to 0.2% today largely due to falling restaurant prices

Under the government scheme, which was designed to boost the ailing hospitality industry after coronavirus lockdown, restaurants and cafes offered 50% off food and non-alcoholic drinks up to £10 a head.

The scheme ran on Mondays to Wednesdays throughout August with the government making up the shortfall in bills.

Some restaurants have continued the scheme into this month too but this is off their own backs as government funding for the scheme stopped on August 31.

But it’s thought chancellor Rishi Sunak is eyeing up the possibility of bringing the scheme back this winter.

This was coupled with a VAT cut from 20% to 5% for those in the hospitality and tourism sectors, which began in July 15 and will remain in place until January 12, 2021.

Major chains, including Costa, Greggs, McDonald’s and Nando’s have all passed on partial or full savings to customers in the form of lower prices as a result.

The ONS adds that air fares and the price of clothes has also risen by less between July and August 2020 than between the same two months a year ago.

Jonathan Athow, deputy national statistician at the ONS, said: “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.

“For the first time since records began, air fares fell in August as fewer people travelled abroad on holiday.

“Meanwhile the usual clothing price rises seen at this time of year, as autumn ranges hit the shops, also failed to materialise.”

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