14 August 2001, 12:36  UK July retail price index-OVERVIEW

--UK Jul RPIX down 0.6% on mo; up 2.2% on yr
--UK Jul RPI down 0.6% on mo; up 1.6% on yr
--UK Jul RPIY down 0.6% on mo; up 2.6% on yr
--UK Jul RPIX below market expectations
--UK Jul HICP up 1.4% on year
--UK Jul service sector inflation up 4.0% on yr; goods up 0.3%
--Main dn effects on UK Jul RPI yrly rate seasonal food, motoring
--Also dn effects on UK Jul RPI from household, personal goods
--Main up effects on UK Jul RPI from clothing, leisure services
--Seasonal food cuts 0.30 pct pts from UK Jul RPI yearly rate

London, August 14 (BridgeNews) - A big fall in potato and fresh vegetable prices helped to produce a larger-than-expected fall in underlying retail price inflation in July, according to figures published Tuesday the Office for National Statistics. RPIX inflation fell 0.6% on the month and rose 2.2% on the year, compared with an annual rate of 2.4% in June and forecasts for a rise of 2.3%. There were also significant downward effects from motoring costs, household goods and personal goods and services.
RPIX (excluding mortgage interest repayments) has now been beneath the Bank of England's 2.5% target for 28 consecutive months.
Headline RPI fell 0.6% on the month and rose 1.6% on the year, down from 1.9% in June to the lowest level since November 1999. RPIY, which excludes mortgage interest payments and indirect taxation, fell 0.6% on the month and rose 2.6% on the year. The EU harmonized measure of inflation rose 1.4% on the year, compared with 1.7% on the year.
By far the biggest downward effect on the annual rate came from seasonal food prices, which knocked 0.3 percentage points off the annual rate. A big increase in the supply of potatoes and other fresh vegetables was the main explanation, unwinding the effect of bad weather on crops earlier in the year.
There was also a big downward from cheaper motoring costs, which cut the annual rate by 0.06 percentage points. Cheaper petrol prices and insurance costs offset the upward effect of more expensive second hand cars.
Household goods prices also had a small downward effect, mainly because of deep discounting in the furniture sector. On the upside, there were inflationary effects from clothing and footwear, leisure services, and housing. Although clothing prices were discounted again this summer the price cuts were not nearly as deep as last year so they produced an upward effect on the index. They added 0.08 percentage points to the annual rate. More expensive foreign holidays were the main culprit behind the rise in leisure services, which in total added 0.05 percentage points to the annual rate.
The figures provide yet more evidence that there is little serious inflationary pressure in the U.K. economy and will vindicate the Monetary Policy Committee's decision to cut interest rates in August for the fourth time this year. Looking ahead, the slowdown in the global economy and the knock-on effects at home are expected to apply further deflationary pressure.

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