According to figures released this morning by the ONS, consumer price index inflation fell by 0.3 percentage points to 2.4% in the year to September 2018, more than reversing the rise in August.
New analysis of the prices of the 136,095 goods and services included in the index this month suggests that the fall in inflation is not due to idiosyncratic factors but is common across many goods, services and regions.
According to the statistical bulletin released by the ONS, a large upward contribution to Consumer Price Index including owner occupiers’ housing costs (CPIH) came from housing and household services (principally from domestic utilities and owner occupiers’ housing costs) and from recreation and culture. Electricity prices rose by 9.3% between September 2017 and September 2018, the highest September 12-month rate since (September) 2011 when prices rose by 12.9%. Within recreation and culture, notable contributions came from package holidays, cultural services and games, toys and hobbies.
Underlying inflation fell by 0.1 percentage points to 0.9% in the year to September 2018, as measured by the trimmed mean, which excludes 5% of the highest and lowest price changes.
At the regional level, underlying inflation was highest in London at 1.2% and lowest in Yorkshire and the Humber at 0.4% in the year to September 2018.
18% of goods and services prices changed in September, implying an average duration of prices of 5.7 months: 4% of prices were reduced due to sales, which is the lowest in any month since 2012; 3.2% fell for other reasons; and 10.4% were increases, which is lower than this time last year.
The data comes after wage figures from the ONS showed pay for UK workers rising by 3.1% in the 12 months to September, the fastest rate of growth since the financial crisis.
Senior economist, Dr Jason Lennard said: “CPI inflation fell to 2.4 per cent in the year to September 2018. Based on our analysis of 135,000 goods and services in the basket, we found that the reduction was not due to idiosyncratic factors but was common across many prices and regions. Our measure of trimmed mean inflation, which excludes the most extreme price changes, fell by 0.1 percentage points to 0.9 per cent in the year to September, dropping in all but two of the twelve regions of the United Kingdom. The slower inflation cannot be accounted for by more items at sales prices, nor by more permanent price decreases, but by fewer price increases. Our analysis suggests that CPI inflation will return to the Bank of England’s target over the next 12 months.”