United kingdom consumer Inflation dipped to 3.1 percent in September easing pressure on the Bank of England to hike interest rates – but businesses warned there is worse to come.
The headline CPI rate was down slightly from the 3.2 percent recorded in August, despite analysts’ expectations it would hold steady.
The figure will give the Bank of England pause for thought amid a growing clamour for a rate rise as soon as next month to stop prices getting out of control.
However, the Office for National Statistics stressed that the downward shift was partly due to the effects of the government’s Eat Out to Help Out discounts unwinding 12 months before.
The British Chambers of Commerce said a “renewed inflationary surge” is still looming, with the Bank expecting the level to top 4 percent this year – more than double its target.
But in interviews this morning, Business Secretary Kwasi Kwarteng urged calm on the inflation threat. “I am confident it will be contained. But we will have to wait and see,” he told BBC Breakfast.
Chancellor Rishi Sunak said: “Global shocks have pushed up prices around the world, and we are working with businesses and international partners to address these pressures.
“We are supporting people with the cost of living, including through a new £500 million support fund to help vulnerable households, the energy price cap, and assistance with energy bills through the winter.”
Mike Hardie, head of prices at the ONS, said: “Annual inflation fell back a little in September due to the unwinding effect of last year’s Eat Out to Help Out, which was a factor in pushing up the rate in August.
“However, this was partially offset by most other categories, including price rises for furniture and household goods, and food prices falling more slowly than this time last year.
“The costs of goods produced by factories rose again, with metals and machinery showing a notable price rise.
“Road freight costs for UK businesses also continued to rise across the summer.”
Average petrol prices stood at 134.9 pence per litre in September 2021, compared with 113.3 pence per litre a year earlier, as fuel provided an upward pressure on inflation, the ONS said.
Suren Thiru, Head of Economics at the British Chambers of Commerce, said: “September’s dip in inflation reflects temporary data distortions rather than the reality on the ground.
“The slowdown was largely due to strong base effects caused by dining out costing less last month in comparison with September 2020, when prices increased following the end of the Eat Out to Help Out scheme.
“A renewed inflationary surge is expected in the coming months with the increase in the energy price cap, partial reversal of the VAT reductions for hospitality & tourism and persistent supply chain disruption. This is likely to push inflation above 4% by the end of 2021.”
MPs were told at a hearing on Tuesday that an average litre of unleaded petrol is now 139.46p – the most expensive since March 2013 and less than 3p below the all-time high of 142.17p set in April 2012.
Prices have risen by more than 26p per litre – nearly 23 percent – in the past 12 months, adding £14 to the cost of filling up a typical 55-litre family car.