The core consumer price index (excluding energy, food, alcohol and tobacco) increased by 3.3% in the twelve months to October 2024, up from 3.2% in September; the annual inflation rate of goods increased from negative 1.4% to negative 0.3%, while the annual inflation rate for services increased from 4.9% to 5.0%.
The consumer price index including housing costs for owners increased by 3.2% in the twelve months to October 2024, up from 2.6% in September. On a monthly basis, the CPI increased by 0.6% in October 2024, up from 0.1% in October 2023.
The consumer price index rose by 2.3% in the twelve months to October 2024, up from 1.7% in September On a monthly basis, the CPI increased by 0.6% in October 2024, up from a slight change in October 2023.
The largest upward contribution to the monthly change in both consumer prices for housing and annual CPI rates came from housing and domestic services, mainly due to electricity and gas prices; the largest compensatory descending contribution came from entertainment and culture.
The core consumer price index (excluding energy, food, alcohol and tobacco) increased by 4.1% in the twelve months to October 2024, up from 4.0% in September; the annual inflation rate for goods increased from negative 1.4% to negative 0.3%, while the annual inflation rate for services remained unchanged at 5.6%.
The Consumer Price Index (CPI) rose 2.3% in the 12 months to October 2024, up from 1.7% in September 2024, and well below its last peak of 11.1% in October 2022. Our typical consumer price inflation estimates indicate that the October 2022 peak was the highest in more than 40 years (the series of official statistics approved from the CPI begins in January 1997).
Sterling Rises After New Inflation Data
The pound rose slightly after the latest inflation data, rising 0.1% to $1.2692 at 8:03 a.m. London time. Sterling rose 0.4% against the euro to €1.20.
Core inflation, which excludes energy, food, alcohol and tobacco, came in at 3.3% during the month, up slightly from 3.2% in September.
The rise was expected in part due to an increase in the energy price cap set by the regulator that came into effect in October, which is expected to lead to higher energy price inflation during the cold winter months.
Prices in the UK’s dominant services sector rose moderately to 5.0% last month from 4.9% in September, reaching their lowest rate in more than two years.
Soren, director of economics at the Institute of Chartered Accountants in England and Wales, said: “Inflation is expected to rise gradually from here as energy bills rise, and the impact of the budget and global trade frictions are likely to keep headline inflation above the Bank of England’s 2% target until 2025.
The data will contribute to the Bank of England’s decision on interest rates on December 19, although another edition of inflation is due before the meeting.
The central bank cut interest rates by 25 basis points earlier this month, but noted that future rate cuts would be “gradual” amid renewed challenges to the economic outlook. As of Wednesday morning, markets were expecting only 14% odds of another quarter-point cut this year.
Lindsay James, investment strategist at Quilter Investors, said Wednesday’s inflation edition made it “increasingly likely” that the Bank of England would close the year with a rate freeze.
What trends have you observed in the core CPI in GBP over the past year?
Over the past year, GBP core CPI trends have shown several important patterns that provide insights into the UK economy:
1. Gradual increase in core inflation
Bullish: There was a noticeable upward trend in the core CPI, indicating persistent inflationary pressures. This is often attributed to supply chain disruptions, increased production costs, and rising wages.
The result: The continued increase suggests that core inflation is becoming more entrenched, which could prompt the Bank of England to consider tightening monetary policy.
2. Influence of external factors
Global impacts: External factors such as energy prices, geopolitical tensions, and post-pandemic recovery efforts have weighed on domestic inflation. Although the core CPI excludes energy costs, high energy prices can still affect general economic conditions and consumer behavior.
Conclusion: These trends suggest that the UK economy is sensitive to global economic conditions, impacting domestic inflationary pressures.
3. Consumer spending behavior
Shift in spending: As the core CPI rises, consumers may change their spending habits, prioritizing commodities over discretionary goods. This shift could slow consumer spending growth, a key driver of the UK economy.
Conclusion: Lower consumer confidence and spending may hamper economic recovery and growth, especially if inflation continues to outpace wage growth.
4. Bank of England response
Policy adjustments: The uptrend in the core consumer price index prompted the Bank of England to consider raising interest rates as a measure to control inflation. This reflects a shift from accommodative monetary policy seen during the pandemic.
Conclusion: Such policy adjustments may have mixed effects on the economy, potentially calming inflation but also affecting borrowing and investment costs.
