The Office for National Statistics recently threw up a red flag of higher prices to come, while the annual rate of inflation slid down to 0.9% last month.
The UK’s national statistical institute put this slip in the headline consumer measure, which had stood at 1% just a month before, down to lower rates of cost growth in tuition fees and clothing compared to a year prior.
Pressure was applied by the drastic increase in both fuel and lubricant costs since April 2012. The Office for National Statistics had warned of a leap in inflation in months to come when the cost of goods leaving factories would rise by 2.1% in October. Meanwhile, costs for raw materials and oil faced by producers rose at a record pace month by month.
Speaking to the BBC, Mike Prestwood, Head of Inflation at the Office for National Statistics commented “After initially pushing up the prices of raw materials, the recent fall in the value of the pound is now starting to boost the price of goods leaving factories as well. However, aside from fuel, there is no clear evidence that these pressures have so far fed through to the prices in shops.”
Released after warnings that the dropping value of the pound since the EU Referendum would stoke consumer inflation after Christmas, these figures fell short of economists’ expectations.
In November 2016, the Bank of England revised its 2017 forecast, raising it up to 2.7%.
Speaking to the BBC, October’s 0.9% inflation figure was described as a “temporary stumble” by UK economist at Capital Economics, Scott Bowman, adding, “We think inflation will peak at about 3.2% in the first half of 2018. This rise in inflation will eat into households’ real incomes and lead to a slowdown in consumer spending growth. However, support from low interest rates, and a probable easing of the fiscal squeeze in next week’s Autumn Statement, should ensure that spending growth doesn’t slow too sharply.“