Inflation rate falls to 0.9% in October

Inflation rate falls to 0.9% in October

According to the National Bureau of Statistics (NBS), "inflation increased by 18.3 percent (year-on-year) in October 2016, 0.48 percent points higher from the rate recorded in September (17.9 percent)". Inflation including owner-occupier housing, now the ONS's preferred measure, was unchanged at 1.2 percent.

Chief UK economist Samuel Tombs said: "October's drop was driven by a fall in clothing inflation to -0.7 per cent, from September's 1.1 per cent rate, which had been boosted by a one-off period of discounting by apparel retailers in September 2015". The BOE sees it reaching 2.4 percent in the second quarter and remaining above target until the end of the decade.

The main pressure came from United Kingdom and European Union student tuition fees, where the impact from the rise in the cap for tuition fees - introduced for new students in England in 2012 - was smaller this year than in 2015 because almost all students are paying the higher rate.

"These downward pressures were offset by rising prices for motor fuels, and by prices for furniture and furnishings, which fell by less than they did a year ago".

Scott Bowman, UK economist at Capital Economics, described October's inflation figure of 0.9% as a "temporary stumble". The index for fuel and power rose by 1% to 187.3 from 185.4 for the previous month due to higher price of aviation turbine fuel (4%), petrol, furnace oil and high speed diesel (2%) and kerosene and LPG (1%). This was the fourth annual increase in a row and the fastest since April 2012.

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The index for primary articles (weight 20.12 per cent) declined by 0.8 per cent to 261.8 from 263.9 for the previous month. Rural retail inflation was 4.78 per cent in comparison to 5.04 per cent in September; for urban sector it stood at 3.54 per cent against 3.64 per cent.

Wholesale Price Index (WPI) or wholesale inflation declined to 3.39% in October 2016 as compared to 3.57% of September 2016.

Frances O'Grady has warned of a "squeeze" in wages combining with increased inflation that could "halt" any rises in living standards.

On a month-on-month basis, the Headline index rose by 0.83 percent in October, higher from the rate recorded in September (0.81 percent).

"The upturn in producers" costs is coming from a combination of higher global commodity prices and the weakened exchange rate, ' he said, pointing to purchasing managers' index surveys showing costs accelerating in October at the highest rate on record.