The Office for National Statistics (ONS) has this morning (7am) released Consumer Prices Index (CPI) inflation figures for October 2023 and it has fallen to 4.6% pa, a huge fall of 2.1% from 6.7% pa in August and September 2023.
As fall was anticipated but the size of the fall was surprising.
The biggest falls came from:
But costs went up for
The old measure of inflation RPI, an arithmetical mean of the average prices of a basket of household spending (rather than the geometric mean for CPI) fell 2.8% to 6.1% pa from 8.9% pa in September.
We prefer RPI as a measure as it tells us that things are tighter for us all when looking at whole expenditure but we understand the Government’s desire not to use RPI as an official national statistic because it would become a ‘vicious circle’ if the Bank of England was using RPI as the benchmark to judge increasing interest rates to bring inflation down because any increase in interest rates would, by default, push RPI up.
High inflation is a killer for economic growth. Ever increasing prices eventually cut off growth as people cannot afford to buy items other then essentials and businesses falter as they cannot afford to expand with reduced demand and ever higher borrowing costs as central banks increase interest rates to counter inflation.
Do not get your ‘dancing shoes’ out just yet. Prices are still rising; they are not falling but the rate of increase is now lower than wages inflation as well as benefits will increase in April 2024 by 8.9% (September’s CPI rate) meaning affordability for us all should improve.
That said, we are still some way off the government’s trend inflation target of 2% pa so do not expect interest rates to be cut until perhaps Autumn 2024 unless the UK economy dives into recession then interest rates may be cut early.