Business

Inflation rate falls to lowest level since June as food price rises cool off

Food was the main downward pull on inflation, which fell to 2.4 per cent in September
Food was the main downward pull on inflation, which fell to 2.4 per cent in September Food was the main downward pull on inflation, which fell to 2.4 per cent in September

THE inflation rate fell to unexpected levels last month, as lower price tags on food eased pressure on household finances.

Figures from the Office for National Statistics (ONS) show the Consumer Prices Index (CPI) fell to 2.4 per cent in September, compared to 2.7 per cent in August.

It is the lowest recorded level since June and came as a surprise to economists who predicted a rate of 2.6 per cent.

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 per cent month-on-month compared to a 0.8 per cent 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 per cent. Bread and cereals and meat also notably declined by 0.9 per cent and 0.4 per cent respectively.

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

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

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

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

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

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

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

At the pumps, motorists were also facing higher fuel costs last month, with petrol up by 1.7p per litre on the month to 130.3p per litre.

Diesel also rose by 1.5p to 134.3p per litre.

Howard Archer, chief economic adviser at EY Item Club, said: "September's drop reinforces belief that August likely marked the 2018 peak in inflation, but it could prove relatively sticky in the near term. This is likely to be the consequence of a higher oil price, previously announced rises in domestic energy prices and recent sterling weakness.

"There is also the risk that food prices could move back up as a result of the summer's heatwave in the UK and Europe following on from severe cold weather in the first quarter."

The Retail Prices Index (RPI), a separate measure of inflation, was 3.3 per cent last month, down from 3.5 per cent in August.

The Consumer Prices Index including owner-occupiers' housing costs (CPIH) - the ONS' preferred measure of inflation - was 2.2 per cent in September, down from 2.4 per cent in August.