Price rises for second-hand cars, clothing and food pushed UK inflation up slightly in October, rising faster than expected but remaining at historically low levels, according to figures published by the Office for National Statistics (ONS).
The Consumer Prices Index (CPI) twelve-month rate hit 0.7 per cent, up from 0.5 per cent in September and slightly above analysts’ predictions of 0.6 per cent.
Rising clothing prices had the biggest pull on inflation, with prices rising 2.8 per cent from September compared with 0.9 per cent the previous year, as summer sale prices were replaced by full-price Autumn ranges. Food and furniture, furnishings and carpets also made sizable upwards contributions, with food inflation rising from -0.1 per cent to 0.6 per cent, a trend that may continue as supermarkets experience increased demand due to the second English lockdown.
Restaurants ending their independent Eat Out to Help Out schemes led to catering services inflation rising marginally from 0.9 per cent to 1 per cent.
Price rises were offset by falling prices for recreational activities, culture and transport. The cost of package holidays fell by 0.5 per cent between September and October, compared with a 0.6 per cent rise in the same two months a year ago, and coach fares fell in price by 14.4 per cent month-on-month, compared with a monthly fall of 5.9 per cent in October 2019.
Jonathan Athow, deputy national statistician for economic statistics, said: “The rate of inflation increased slightly as clothing prices grew, returning to their normal seasonal pattern after the disruption this year. The cost of food also nudged up, while second-hand cars and computer games saw price rises. These were partially offset by falls in the cost of energy and holidays.”
Inflation remains well below the Bank of England’s target rate of 2 per cent. It has been on a downward trend for the past two years which was accelerated by the covid-19 pandemic, reaching a low of 0.2 per cent in August, the lowest level since December 2015.
Economists said inflation was likely to remain low given the weakened economic outlook, despite surpassing predictions this month.
“October’s inflation figures have come in slightly above expectations. Yet they reflect a disinflationary environment, given the current backdrop of weak wage growth, rising unemployment and abundant spare capacity,” Debapratim De, senior economist at advisory firm Deloitte, told the Financial Times.
“Inflation is likely to remain subdued until the economy regains most of the lost activity due to the pandemic.”
Samuel Tombs, chief UK economist at consultancy Pantheon Economics, noted second-hand car price inflation also soared in October as consumers sought to avoid public transport, but said prices would likely stabilise and then drop as a vaccine becomes available.
Paul Dales, chief UK economist at consultancy Capital Economics, said the increase of the last two months showed inflation was “well past its low point” but would probably not increase far beyond the Bank of England’s 2 per cent target during 2021.
“Even if Covid-19 vaccines are widespread by then, we suspect that a lot of economic slack will prevent inflation spending much time above the 2 per cent target,” he said.
“The exception is if there were any type of no-deal Brexit at the end of this year. In that case, the boost to imported inflation from a weaker pound could temporarily push up inflation to somewhere between 3 per cent and 4 per cent.”
19th November 2020.
