Annual consumer price inflation was 4.6 per cent in October, the lowest level in two years, decreasing from 6.7 per cent in September. This figure reflects a large fall in the housing, electricity, gas and other fuels category which contributed 1.6 percentage points out of the overall monthly fall. The drivers of these decreases were energy prices, which rose steeply last October but have now ‘dropped out’ of the CPI basket: for instance, gas costs fell by 31 per cent in the year to October 2023 while electricity costs fell by 15.6 per cent in this time.
Food inflation fell to an annual rate of 10.1 per cent, down from 12.1 per cent in September. Still, that it remains so elevated and in double-digits is concerning since there is no government support to help households (especially lower income households, who spend a greater part of their incomes on food) offset this cost.
Core CPI was 5.7 per cent in the year to October, down from 6.1 per cent in; NIESR’s measure of trimmed-mean CPI inflation fell from 7.3 to 6.5 per cent; and annual services CPI inflation fell slightly from 6.9 to 6.6 per cent. These measures indicate that underlying inflationary pressures remain elevated (and indeed now above the headline CPI rate) and therefore may continue to generate persistence in the headline rate. That said, it is good news that they are easing significantly.
Our recent Autumn UK Economic Outlook forecasts that inflation will reach the Bank of England’s 2 per cent target by the end of 2025.