UK inflation remains unchanged at 2.4% in October

The consumer prices index (CPI) rate stood still at 2.4% in October, remaining unchanged from September, with lower food and clothing prices offsetting rising fuel costs.

Bank of England
Source: Bloomberg

The UK Consumer Prices Index (CPI) 12-month rate was 2.4% in October 2018, unchanged from September 2018, according to the Office of National Statistics (ONS).

The large downward contributions to the CPI included food and non-alcoholic beverages, clothing and footwear, and some transport elements, which were offset by rising fuel costs, the ONS explained.

Other smaller upward contributions came from miscellaneous goods and services, recreation and culture, and communication sectors.

Other upward contributions came from housing and household services, principally from domestic utilities, with electricity prices up around 9% and gas prices increasing by 7.6% in the 12 months to October 2018.

Inflationary pressures subsiding

The National Institute of Economic and Social Research (NIESR) after analysing 135,000 goods and services in the CPI basket found evidence that inflationary pressures were subsiding.

‘While there were fewer items sold at sales prices, there were more permanent price decreases and less price increases compared to previous years,’ Senior Economist at the NIESR Jason Lennard said.

‘This weakness is widespread, as underlying inflation fell in every region of the country except for Yorkshire and the Humber,’ he added.

BoE to reach 2% target

Inflation is likely to continue to slow over the coming months reflecting a broader cooling of the economy since the summer, a stumbling housing market in London and the effects of the Bank of England's interest rate increase in August, according to Mike Jakeman, Senior Economist at PwC.

‘We expect inflation to slow to the central bank's 2% target, and, for as long as this trend persists, would rule out another rate hike in the short term,’ he said.

‘The combination of slowing inflation and accelerating nominal wage growth is a favourable one for workers, who will see their buying power improve in the remainder of this year and in 2019.’

‘The effect on the economy depends on whether workers choose to spend or save this income; saving rates have been at record lows in recent years and some households have been using savings to pay for everyday expenses,’ he added.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Find articles by writer