UK inflation unexpectedly rate falls to 0.9% from 1%.

UK inflation unexpectedly rate falls to 0.9% from 1%.

Britain’s rising inflation rate has been brought to a halt after cheaper clothes and a smaller increase in university tuition fees meant the annual increase in the cost of living fell to 0.9%.

Source: Google

Despite higher fuel prices and the impact of the weaker pound on the cost of imports, inflation as measured by the consumer prices index dropped back from 1% in September.

City analysts – who had been predicting an increase to 1.1% – said the respite would prove temporary and that inflation would continue its upward march over the coming months.

That was below the 1.1% predicted by economists, who said sterling's fall would push October's CPI higher.

However, the ONS said factory gate prices and the costs of raw materials rose much faster in October.

The price of goods leaving factories rose by 2.1%, faster than expected and the biggest increase since April 2012. And costs faced by producers for raw materials and oil showed a record monthly jump in October, up by 4.6%.

"It looks inevitable that consumer purchasing power will deteriorate markedly over the coming months as inflation moves appreciably higher and earnings growth is limited.

"Companies will highly likely look to clamp down on workers' pay as they strive to save costs in a more difficult environment and as their imported input prices are lifted by the sharply weakened pound."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The decline in inflation in October, after its big jump to 1% in September from 0.6% in August, mainly reflects volatility in pricing a year ago and does not imply that the relationship between sterling and inflation has
loosened.

"Despite October's weak number, CPI inflation remains set to make big strides towards the 2% target over the next three months, as the anniversary of sharp falls in motor fuel and food prices is reached.

"Thereafter, sterling's depreciation will begin to push inflation up sharply, utility companies will respond to the recent rise in wholesale energy prices by lifting consumer tariffs, and services inflation likely will continue to grind higher as firms grapple with big increases in minimum wages and non-wage labour costs."