United Kingdom inflation picks up a bit more than expected in October

The inflation rate in Great Britain rises to 0.7

The Consumer Prices Index (CPI) measure of inflation in the United Kingdom was 0.7% higher year-on-year in October 2020, up from 0.5% in September and a beat on consensus market expectations for a reading of 0.60%.

Inflation is traditionally a the single most important economic consideration for the Bank of England when it comes to setting interest rates, and news that inflation is stronger than expected might have in the past lead to expectations for interest rate rises at the Bank.

Food prices rose between September and October, with most of the increase coming in fruit and vegetables, the ONS said.

Normally prices for clothes and shoes fall each year between June and July in summer sales before autumn ranges come in, and then rise before sales towards the end of the year, the ONS said.

Transport and vehicle prices also pushed higher, as the price of second-hand cars rose by 1.4 per cent, with new auto prices up 0.5 per cent as demand for cars improved in the face of guidance to avoid public transport. Meanwhile, food prices rose 0.1 percent in the month, as compared with a decline of 0.7 percent in October 2019.

"Notably, many existing homeowners were spurred on to move by the combination of needing more space and the temporary Stamp Duty changes".

Inflation is the rate at which the prices for goods and services increase.

Restaurants and hotels continued to put inflation under pressure last month due to a temporary cut in Value-Added Tax.

Some surveys of consumers had suggested renewed stockpiling as health restrictions spread through Scotland, Wales and Northern Ireland in October.

Concerning the outlook for inflation, economists at PwC say the current UK-wide lockdowns will sap price growth from the economy into year-end. A one-month lockdown was announced for England at the end of the month and started on November 5.

Gas prices dropped by 12.3% and electricity prices fell 3.2% between September and October.

Core inflation measures - often seen as a better gauge of underlying price pressures - ticked up to an average of 1.77 per cent in October, the highest reading since February, from 1.7 per cent in September.

The largest downward pressure on inflation was caused by a fall in household energy prices.

Where some prices are slowly rising, the national lockdown measures now in place can only exert further deflationary pressure.



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