The latest figure for price inflation has been released – and it’s both good news and bad news for the government.
Many economists predicted it would rise this month compared to August, but the Office for National Statistics (ONS) says it has instead held at the same rate of 3.8%.
However, that’s still a fair bit higher than the 2% target and Chancellor Rachel Reeves isn’t happy about it.
She said: ‘For too long, our economy has felt stuck, with people feeling like they are putting in more and getting less out. That needs to change.’
The headline figure masks a much more complicated reality.
When the ONS is calculating how quickly prices are rising – what’s known as the inflation rate – it looks at a vast range of items and services from hotel rooms and booze to restaurant meals and motor fuel.
So while inflation across the board is at 3.8%, some of the things we buy every day will be going up in price more quickly than others.
The main piece of good news from today’s announcement is a fall in the price of food and non-alcoholic drinks.
It’s only a small reduction of 0.2% on a monthly basis, but that’s the first time it has gone down since May last year.
The biggest price increases in the past 12 months were in housing and household services, which had an inflation rate of 7.3%. Prices in the education sector, which includes tuition fees, had a 7.2% inflation rate.
Alcohol and tobacco products, meanwhile, were 5.8% more expensive than they were in September last year.
The fall in food and non-alcoholic drink prices in the last month meant it had a lower inflation rate this month compared to August – 4.5% versus 5.1% – but they’re still pricier than they were last September.
Here are some more of the individual inflation rates this month:
- Chocolate: Up 18.1% in the 12 months to September
- Petrol: Down 2.1%
- Diesel: No change
- Soft drinks: Up 6%
- Fruit: Up 4.1%
- Crisps: Up 1.8%
- Eggs: Up 4%
- Bread: Up 1.5%
- Fish: Down 1.6%
How do they work out the inflation rate?
The whole picture is complicated by the way the rate is calculated: prices are compared to where they were this time last year. This month’s rate means prices are 3.8% higher than they were in September 2024.
Take air fares for example. They fell by 28.8% from last month, the third biggest drop in price for September since 2001.
But last year, air fares fell by 34.4% between August and September – which was the biggest drop since 2001.
Despite this year’s reduction in price, it didn’t fall quite as far as it did this time last year, which pushed up the inflation rate.
All this means it’s quite hard for day-to-day government decisions to have an impact on inflation, as it depends on whether prices happened to be particularly low or high exactly a year ago.
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