U.K. Inflation Hits 3-Year Low as Energy Price Cap Takes Effect
U.K. Inflation Hits 3-Year Low as Energy Price Cap Takes Effect
(Bloomberg) --
Cheaper gas and electricity pushed U.K. inflation to its lowest rate in almost three years last month, bringing respite for Prime Minister Boris Johnson after two days of disappointing data.
Consumer prices rose 1.5% from a year earlier, the smallest increase since November 2016, after a new energy price cap came into force, the Office for National Statistics said Wednesday. Core inflation stayed at 1.7%.
The figures will be seized on by Conservatives campaigning for the Dec. 12 general election as evidence that living standards are continuing to rise in the face of Brexit uncertainty. They follow data this week showing wages slowing and job losses mounting amid the weakest economic growth for almost a decade.
The lack of headline inflation may also reinforce the increasingly dovish tilt at the Bank of England, where two officials broke ranks to argue for interest rates to be lowered this month.
Inflation is now well below the BOE’s 2% target, and running at less than half the pace of earnings growth. The BOE expects it to slow further next year and stay below target until the end of 2021.
Gas and electricity prices dropped 4.4% between October and September, leaving them 1.9% lower than a year earlier. Regulator Ofgem estimates its new cap, which was lowered in response to cheaper wholesale prices, will save 11 million people an average of £76 a year.
No Clothing Discounts
These effects were partially offset by clothing and footwear prices, which rose by 1% as stores failed to repeat the discounts seen a year earlier. The ONS said inflation would have stayed at its September rate of 1.7% if the impact of energy prices was excluded.
Other figures showed pipeline pressures remained subdued. Input prices fell 5.1% from a year earlier, the biggest annual decline since April 2016, with crude oil exerting the biggest downward effect. Output prices rose just 0.8%, the least since August 2016.
House prices in England and Wales in September rose 1.3% in September from a year earlier, the same pace as in August. The worst-performing region was London, where prices declined 0.4% as Brexit uncertainty took its toll.
House prices in the U.K. capital have fallen 5.1% since their peak in July 2017, costing homeowners 14,000 pounds ($18,000) on average.
©2019 Bloomberg L.P.