Stabilising fuel prices leads to CPI rise

CPI annual inflation was 1.5 per cent in October, up from 1.1 per cent in September, according to consumer price indices from the Office for National Statistics (ONS).

By far the largest upward pressure affecting the change in the CPI annual rate came from transport. The largest upward effect within transport came from fuels and lubricants, where prices fell by 0.7 per cent between September and October this year but fell by a record (for a September to October period) 6.1 per cent a year ago. The large fall in 2008 was due to sharp falls in petrol and diesel prices, reflecting the falling price of crude oil in the latter half of 2008. Within transport there were also large upward contributions from:

The purchase of second-hand cars where prices rose this year at their fastest ever rate (1.1 per cent) between a September and October but fell a year ago. The annual inflation rate for second hand cars in October is a record high at 13.2 per cent.

Air transport where, overall, fares increased by 1.5 per cent this year but fell significantly a year ago; in fact, the 6.2 per cent decrease in 2008 was a record fall between a September and October.

There were further large upward pressures from:

Recreation and culture, where prices rose between September and October this year but fell a year ago. The largest upward effects came from recording media and, to a lesser extent, from games, toys and hobbies. Within recording media the largest upward contribution came from DVDs; within games and hobbies the largest upward effect came from computer games.

Food and non-alcoholic beverages, mainly due to food where, overall, prices increased by more than a year ago. Within food the largest upward effect came from meat (particularly pork products) with the next most significant upward contributions coming from bread and cereals and vegetables.

Communication, where prices rose between September and October this year by more than a year ago, mainly due to increases in landline telephone charges.

The largest downward pressure affecting the change in the CPI annual rate came from miscellaneous goods and services principally from banking services where prices fell by more than a year ago due to reductions in bank overdraft charges and mortgage arrangement fees. Partially offsetting these downward effects was a small upward contribution from house contents insurance where prices rose by more than a year ago.

There was also a large downward contribution from education where university fees rose this year but by less than a year ago.

In the year to October, RPI annual inflation fell by 0.8 per cent, compared with a fall of 1.4 per cent in September. The last time there was an increase in the annual inflation rate greater than 0.6 per cent was between July and August 1990, when the rate increased from 9.8 per cent to 10.6 per cent. In October 2009, the main factors affecting the CPI also affected the RPI; however, the different methods used to measure the price of new cars in the CPI and RPI resulted in a larger upward contribution to the RPI (compared with the CPI) from the purchase of vehicles. Additionally, there was upward pressure from housing, mainly due to house depreciation (depreciation is excluded from the CPI); this is due to the fact that house prices are increasing this year but were falling a year ago.

RPIX inflation - the all items RPI excluding mortgage interest payments - was 1.9 per cent in October, up from 1.3 per cent in September.

As an internationally comparable measure of inflation, the CPI shows that the UK inflation rate in September, at 1.1 per cent, was above the provisional figure for the European Union as a whole of 0.3 per cent.