U.K. September CPI Lowest Since March 2006

UK CPI annual inflation was 1.8% in September, as the cost of energy and clothing fell, giving the Bank of England scope to protect economic growth by cutting interest rates.

Large downward contributions to the change in the CPI annual rate came from: Housing and household services, due to gas and electricity bills which both fell as a result of the continued phasing in of recent tariff reductions. Over the same period last year, average gas and electricity bills rose; and

Clothing and footwear as prices overall rose by less than last September especially for men's outerwear. In particular, prices for winter coats fell this year, compared with sharp increases a year ago.
The largest upward effect on the CPI annual rate came from food and non-alcoholic beverages, where price increases were recorded for a number of dairy products including:
Milk, cheese and eggs, due to widely publicised price increases for shop bought milk, particularly at supermarkets. The average price of a pint of milk rose by around 4 pence per pint in September, a record one month increase; and

Oils and fats, where average prices for both margarine and butter increased in September by over 15 per cent.
A large, partially offsetting downward effect within food came from vegetables, due to price changes on some winter vegetables and tomatoes.

RPI inflation fell to 3.9 per cent in September, down from 4.1 per cent in August, mainly due to average mortgage interest payments. Average rates were largely unchanged in September, but rose a year ago, when most lenders passed on the quarter point rise in the Bank of England Bank rate announced in August 2006. Mortgage interest payments are excluded from the CPI.

Other factors influencing the RPI were similar to those affecting the CPI. RPIX inflation – the all items RPI excluding mortgage interest payments – was 2.8 per cent in September, up from 2.7 per cent in August.

As an internationally comparable measure of inflation, the CPI shows that the UK inflation rate in August, at 1.8 per cent, was close to the provisional figure for the European Union as a whole of 1.9 per cent.

U.K. September CPI Lowest Since March 2006

Office for National Statistics
10/16/2007 6:15:20 AM