CPI inflation - another month below target

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CPI inflation has now been below its target for nine consecutive months, and is likely to remain there for the rest of the year. Today’s blog looks at these figures in more detail.

Data released this morning shows that annual CPI inflation edged down to 1.2% in September, its lowest level since September 2009.

There was downward pressure on inflation from:

  • Transport: most notably sea and air fares.  Overall, prices fell by 2.4% between August and September this year, compared with more modest falls a year ago.
  • Recreation & culture: Much of the downward contribution came from price movements for technological goods.
  • Restaurants and hotels: particularly restaurants, cafes and canteens.

There were no notable upward contributions to the change in the CPI 12-month rate between August and September 2014.

The level of CPI inflation should remain below its target for some time to come. For the time-being there is little pressure on inflation either domestically, or from imported goods. Even core inflation – which excludes erratic items: food, alcohol, tobacco and fuel – and has been nearer the 2.0% mark for the last few months, fell to 1.6%.

Manufacturers’ input prices have also been falling; the producer price index showed input prices falling for an 11th consecutive month in September, with the overall price of materials and fuels bought by UK manufacturers down 7.4% over the year to September.

There was downward pressure on input prices from:

  • Crude oil prices: fell 16.0% in the year to September, the biggest fall since September 2009.
  • Food prices: home produced food prices were down 12.2% in the year to September while imported food prices fell 7.8% in the year to September.         

However, there was some upward pressure from other home produced materials (up 9.5% in the year to September).

Manufacturers’ output prices also fell. Output prices were down 0.4% in the year to September, marking the third consecutive fall in annual output price inflation.

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