Inflation Falls To Five-Year Low Of 1.2%

Written By Unknown on Rabu, 15 Oktober 2014 | 12.07

Plunging fuel costs and a supermarket price war are being credited for the latest dip in the annual rate of inflation.

The Office for National Statistics (ONS) measured a 1.2% rise in consumer prices in the 12 months to September - its lowest level for a decade if the September 2009 figure is excluded.

The easing from a rate of 1.5% in August was much stronger than economists had predicted and highlighted the extent of the grip on price pressures currently being exerted by major supermarkets.

The sector, which imposed a new round of cuts on petrol pump prices on Tuesday, has been battling an in-store challenge from hard discounters such as Aldi and Lidl.

Price cuts to help keep customers from making a switch have been made at a time of wider price falls in commodities such as wheat and oil - the latter falling to four-year lows.

While cutting their margins does little for supermarket profits, the war for market share is seen as more important with Tesco and Morrisons currently losing ground.

A separate report on Tuesday by the British Retail Consortium suggested warm weather in September helped push retail sales to their weakest level for almost six years.

It said while people delayed buying goods like coats and footwear there was also a significant hit to sales values from the supermarket price war.

While the inflation figure is good news for every family - despite earnings growth still lagging behind inflation - pensioners also learned today how much more they would receive next spring.

The CPI figure means that state pensions will rise by 2.5% or £2.85 a week as the Government's so-called 'triple lock' ensures an increase of whichever is the greater out of average earnings, September's inflation rate or 2.5%.

The ONS said that food and non-alcoholic beverage prices fell by 1.4% year on year, the steepest drop since June 2002 and the fifth month in a row that they have not risen on an annual basis.

It is the longest sustained period of flat or falling food prices since the end of 2004, the body said.

Petrol fell by 0.8p per litre in September compared with the previous month and diesel by 0.7p.

Sea and air fares fell more steeply than at the same time last year while laptops and tablets, computer games, games consoles, books and e-books also contributed to the inflation slowdown.

The ONS said that were it not for the impact of falling food and motor fuel prices - the latter of which were down 6% - the rate of inflation would be around a third higher at 1.6%.

The pound fell sharply after the figures were released as the sharper-than-expected drop meant it was less likely that the Bank of England would need to take action soon to raise the base rate of interest from its five-year low of 0.5%.


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