WIREDGOV

According to figures released this morning by the ONS, consumer price index inflation fell by 0.3 percentage points to 2.4 per cent in the year to September 2018, more than reversing the rise in August. Our 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.

Main points

• Underlying inflation fell by 0.1 percentage points to 0.9 per cent in the year to September 2018, as measured by the trimmed mean, which excludes 5 per cent of the highest and lowest price changes (figure 1).
• At the regional level, underlying inflation was highest in London at 1.2 per cent and lowest in Yorkshire and the Humber at 0.4 per cent in the year to September 2018 (table 1).
• 18 per cent of goods and services prices changed in September, implying an average duration of prices of 5.7 months: 4 per cent of prices were reduced due to sales, which is the lowest in any month since 2012; 3.2 per cent fell for other reasons; and 10.4 per cent were increases, which is lower than this time last year (figure 2).
• The historical relationship between current trimmed mean inflation and future CPI inflation implies CPI inflation of 2 per cent in the year to September 2019.

Dr Jason Lennard, Senior Economist, 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.”

This analysis builds on the work presented in the latest National Institute Economic Review, which constructs a measure of trimmed mean inflation based on the goods and services prices that underlie the consumer price index.

Our next analysis of consumer prices will be published on 14 November.

Notes for editors:

For further information and to arrange interviews, please contact the NIESR Press Office:
Paola Buonadonna on 020 7654 1923 / p.buonadonna@niesr.ac.uk

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