Lower food prices help lower UK inflation rate

Wednesday, October 17, 2018

The UK inflation rate fell more than expected in September after a six-month high was recorded in August.

Figures from the Office for National Statistics (ONS) showed that inflation fell to 2.4% in September, down from 2.7% recorded in August.

The decrease has been largely linked to lower price tags on food and non-alcoholic drinks.

It came as a surprise to economists who were expecting inflation to fall to 2.6%.

Sterling was 0.3% down against the US dollar at 1.31 following the news. Versus the euro, the pound was down 0.2% at 1.13.

Mike Hardie, head of inflation at the ONS, said: "Food was the main downward pull on inflation as last year's September price rises failed to reappear, while ferry prices dropped after their surprisingly high summer peak.

“However, it wasn't all one-way traffic with energy suppliers pushing up their prices."

The price of food and non-alcoholic beverages fell 0.2% month-on-month compared to a 0.8% rise during the same period last year.

Some of the biggest drops were seen in sweet treats such as chocolate, with prices down 1.4%. Bread and cereals and meat also notably declined by 0.9% and 0.4% respectively.

Recreation and culture prices returned to more normal levels, growing by just 0.3% compared to 0.8% a year earlier.

Cultural services, which includes theatre tickets, fell 2.5% while games, toys and hobbies rose just 1.6%, compared to a 4.4% rise in September last year.

Transport services were down 9.7%, after falling 7.8% last year.

Prices for trips made by sea and waterway were especially hard-hit, dropping 26.5% compared to a decline of 15.2% last year.

Meanwhile the downward trend in air travel continued, dipping 27.3% following a 26.7% fall a year earlier.

The drag on inflation was partially offset by increases in electricity and gas prices.

Electricity rose 1.8% and gas was up 1.2%, whereas both were flat this time last year.