UK Stays in Deflation for 2nd Month

Consumer prices in the UK dropped 0.1% yoy in October, the same as in September and in line with market expectations. It is the first time in half a century CPI have fallen on an annual basis for two months in a row. On a monthly basis, the inflation rate was 0.1 percent, rebounding from -0.1 percent in September.

Year-on-year, prices of food and non-alcoholic beverages recorded the biggest drop (-2.7 percent from -2.3 percent in September), followed by transport (-2.6 percent from -2.7 percent) and recreation and culture (-0.4 percent from -0.8 percent). In contrast, the highest upward pressure came from housing and utilities (0.2 percent from 0.1 percent), restaurant and hotels (1.6 percent from 1.8 percent), miscellaneous goods and services (0.8 percent from 0.6 percent) and clothing and footwear (0.8 percent from -0.6 percent).

On a monthly basis, consumer prices edged up 0.1 percent, rebounding from a 0.1 percent drop in September. The largest upward contribution came from cost of clothing and footwear, up 2 percent, the largest monthly gain since record began in 1996. The rise came primarily from price movements for a broad range of outerwear, where fewer products were on sale this October compared to a year ago. This continues the trend seen over the summer of atypical monthly price movements in the clothing and footwear sector, with reports of retailers changing their sales strategies. Additional upward pressure came from prices of recreation and culture (up 0.8 percent), mainly due to a range of recreational goods, most notably computer games and consoles. The largest downward impact was recorded for education (prices, overall rose by 3.6 percent compared with a larger rise of 7.9 percent between the same 2 months a year ago). The downward contribution came principally from UK and EU student tuition fees, where the impact from the rise in the cap for tuition fees (first introduced for new students in England in 2012) was smaller this year than in 2014. Cost of food and non-alcoholic beverages fell by 0.4 percent and cost of alcoholic beverages and tobacco (-0.4 percent) went down for the first time since the same period in 2009, mainly due to wine, spirits and tobacco.

Annual core inflation rate which strips out increases in energy, food, alcohol and tobacco was recorded at 1.1 percent in October, up from 1 percent in the previous two months.

UK Stays in Deflation for 2nd Month

ONS | Joana Taborda |
11/17/2015 10:36:49 AM