Inflation rise stalls but remains at record high despite drop in fuel costs
PUBLISHED: 10:26 14 November 2017 | UPDATED: 10:26 14 November 2017
Inflation unexpectedly paused last month, as rising food prices were countered by a drop in fuel costs.
Figures from the Office for National Statistics (ONS) showed the Consumer Price Index (CPI) measure of inflation was 3% in October, unchanged from a five-year high in September.
Economists had pencilled in a higher rate of 3.1%, which would have forced Bank of England governor Mark Carney to write a letter to chancellor Philip Hammond explaining why inflation is so high.
The government has set an inflation target of 2%, with protocol dictating that the Bank must contact Mr Hammond if inflation exceeds 3% or falls short of 1%.
The Bank expects CPI to peak at around 3.2% in the autumn, adding further pressure to UK households grappling with paltry wage growth.
The pound was 0.3% lower at 1.31 US dollars and 0.6% down at 1.12 euro after the inflation data.
Mike Prestwood, ONS head of inflation, said: “Inflation remains at a five-year high with rising food prices offset by a fall in the cost of fuel.”
Annual food prices rose to the highest level in four years, up 4.2% last month in contrast to a 3.4% expansion in September.
The lion’s share of the growth came from vegetables, which saw a yearly rise of 5.7% compared to a 1.1% expansion the month before, following a rise in the cost of premium potato crisps.
On the month, food prices grew by 0.6%, up from a 0.2% fall over the same period last year.
Electricity, gas and other fuels also pushed 1.3% higher on a monthly basis, compared to 0.6% growth in October last year.
The jump was triggered by British Gas, which decided to hike its standard tariff by 12.5% on September 15.
It is the first time the price rise has appeared in official data due to the time frame in which the information is collected.
The main downward pressure on the cost of living came from fuel prices, which fell by 0.4% month-on-month after rising by 2.3% in October 2016.
Petrol prices fell by 0.9 pence a litre to 117.3 pence last month, while diesel rose by 0.4 pence per litre to 120.5 pence.
The Retail Price Index (RPI), a separate measure of inflation, was 4% last month, up from 3.9% in September.
The Consumer Price Index including owner-occupiers’ housing costs (CPIH) - the ONS’ preferred measure of inflation - was 2.8% in October, the same rate as the month before.
Stephen Clarke, policy analyst at the Resolution Foundation, said despite the pause it was not all good news for the less well-off. He said: “While the headline rates of inflation remained unchanged, the drivers of inflation have continued to shift – and are hitting less well-off families particularly hard.
“Food and drink prices increased faster than at any point in the last four years, while clothing prices also rose at a rate above overall inflation. The rising cost of these basic items affects low and middle income households far more than better-off households, who are also being cushioned by static fuel costs.
“With prices rising far quicker than wages, it is vital that the chancellor keeps in mind the double whammy of squeezed pay packets and frozen benefits when he announces his Budget next week.”