UK Has Highest Inflation In The European Union

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The rise in the cost of living in the UK was 1.5% in the year to August – a slight fall from 1.6% reported in July.

The Office of National Statistics (ONS) says a drop in the prices of fuel, food and non-alcoholic drinks was pulling down the consumer price index (CPI).

Price increases for clothing, transport and alcohol stopped the rate of inflation fall further.

According to the ONS, a basket of goods costing £100 in August 2013 now costs £101.50.

Although inflation has fluctuated over recent months, the figure is still well below the Bank of England’s target rate of around 2% a year.

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Eurozone deflation threat

In Europe, Eurozone inflation remained the same in August as in July – at 0.4%. The annual rate of inflation 12 months earlier was 1.3%.

The European Union inflation rate for all 28 member states was o.5%, again unchanged from July and reflecting an annual rise in prices of 1.5%.

Eurostat, the EU’s official statistics provider cited restaurant and café price rises, rents and vehicle repairs as having the rises for the month.

Worryingly for EU finance ministers, Bulgaria (-1%), Spain (-0.5%), Estonia, Greece, Italy, and Slovakia (all -0.2%), Poland and Portugal (both -0.1%) have lurched into price deflation.

Sweden, Croatia, Denmark, Lithuania and Hungary are all hovering dangerously close to deflation with inflation rates of 0.3% or less.

Britain and Austria have the highest European inflation rates – both 1.5%.

Falling commodity prices and a lack of decisive monetary action by the European Central Bank could flag further deflationary problems for the single currency zone as the value of the euro falls against other major currencies.

Some experts are warning that the Eurozone could see a period of deflation similar to the economic woes that have hit the Japanese economy.

Cost of living out of control

Outside Europe, the countries facing major inflation issues include Russia, where economic sanctions are expected to add 2% to the cost of living in the coming weeks. Inflation is running at around 7.1% and has risen around 1% since the start of the year.

Indecision and kowtowing to vested interest in Venezuela have seen inflation break through the 60% mark – and it is still rising.

Sanctions and poor financial governance are also starting to bite in Iran, where inflation is 14.1% and rising.

Civil disobedience and the annexation of The Crimea by Russia are playing havoc with prices in The Ukraine. The cost of living has risen by 14.1% in the past 12 months.

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