In the first nine months of the year, CPI rose 1.4 percent from the same period in 2014, well below the government’s target of an increase “around three percent” this year.
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In the year to September 2015, the ONS says that food prices fell by 2.5 per cent while prices of motor fuels fell by 14.9 per cent. These two groups have provided a few of the largest downward contributions to the 12-month rate throughout 2015, thanks to the plummeting cost of oil and an ongoing price war among the UK’s largest supermarkets.
The General Indices (Provisional) for the month of September 2015 for Rural, Urban and Combined stood at 127.0, 123.5 and 125.4 respectively.
WPI inflation rate edged up marginally to (-)4.54 per cent in September with pulses, vegetables and onion turning costlier even as the overall deflationary trend persisted for 11th month in a row.
A breakdown of the WPI into commodity and ex-commodity prices shows that while WPI commodity prices contracted -16.1% y-o-y, WPI-ex commodity prices actually rose 0.7% y-o-y in September (Please see Figure 2).
The Wholesale Price Index-based inflation was (-)4.95 per cent in August. Excessive inflation can hurt the economy, but reasonable inflation indicates healthy demand and economic growth.
The CPI declined from zero to minus in August to 0.1 per cent in September – a decline that analysts said would ease any immediate pressure on the Bank of England to increase record low interest rates, despite a few concerns that underlying inflationary pressures are building.
While the price rise in the food and beverages category nearly doubled from a month earlier to 4.29 per cent in September, inflation in cereals and products was also higher at 1.38 per cent.
Lower interest rates tend to boost inflation, although economists have recently warned that in the current environment cheaper borrowing costs may do little to stoke spending by businesses or consumers.
“The rate of consumer price inflation has now been zero (or close enough to make no difference) since February”.
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Domestic consumer prices might rise “moderately” in the fourth quarter due to seasonal factors, but dramatic fluctuation is unlikely, officials and experts said on Thursday. Most economists believe third quarter GDP growth slowed to 6.8%.
