The sharp decline in the pace of price rises is down to energy and food costs starting to ease.
The Consumer Prices Index (CPI) measure of inflation rose by 4.6% in the 12 months to October 2023, down from 6.7% in September, and from the peak 11.1% in October 2022, according to the Office for National Statistics (ONS).
On a monthly basis, CPI did not change in October 2023, compared with a rise of 2% in October 2022.
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 4.7% in the 12 months to October 2023, down from 6.3% in September. On a monthly basis, CPIH rose by 0.1% in October 2023, compared with a rise of 1.6% in October 2022.
The ONS said the largest downward contribution to the monthly change in both CPIH and CPI annual rates came from housing and household services, where the annual rate for CPI was the lowest since records began in January 1950.
The second-largest downward contribution to the monthly change in both CPIH and CPI annual rates came from food and non-alcoholic beverages where the annual rate was the lowest since June 2022.
Housing and household services prices fell by 0.3% between September and October 2023, compared with a rise of 3.4% between the same two months a year ago.
The decrease in the rate between September and October 2023 reflected downward effects from gas and electricity. Gas costs fell 31% in the year to October 2023, compared with a rise of 1.7% in September. This is the lowest annual rate since records began in January 1989. Electricity costs fell 15.6% in the year to October 2023, compared with a rise of 6.7% in September. This is the lowest annual rate since records began in January 1989.
However, although electricity and gas prices have fallen on the month and the year, their prices are still high in comparison to recent years. The price of gas in October 2023 was around 60% higher than it was in October 2021, while the price of electricity in October 2023 was around 40% higher than it was in October 2021.
‘Not out the woods yet’
Derrick Dunne, CEO of YOU Asset Management, said: “The Consumer Prices Index data released this morning gifted the Prime Minister some welcome light in the dark this Diwali, with the CPI falling to below 5% – enabling him to come good on his inflation pledge [to halve inflation in 2023] after all.
“It comes a day after the release of heavily caveated ONS Labour Force Survey estimates, which point to a continued tightening of the job market and wage rises slowing in construction and manufacturing.
“All of which gives the Monetary Policy Committee plenty to mull over when it next meets. It is looking increasingly unlikely that they’ll vote in favour of another base rate rise as they wait to see the ongoing impact of higher interest rates in a number of key areas. That said, it’s not time to pop the cork on the Champagne bottle just yet, as it is also, according to the Bank of England governor, unlikely that we’ll see the base rate start to come down until well into next year.”
Alastair Douglas, CEO of TotallyMoney, said: “Even if inflation halved from today’s rate between now and Christmas, it still wouldn’t be enough for the millions of households who are struggling to keep up. The cost-of-living crisis has wreaked havoc on people’s finances, and its legacy will continue to impact their lives for years to come – especially the most vulnerable.
“And although wages have been rising, high interest rates and weak consumer spending is impacting businesses – insolvencies are up 18%, and small firms and the self-employed are likely to be feeling the strain the most. We’re not out of the woods yet, and after the last two turbulent years, support is needed now more than ever. But the banks are tightening up their lending, and government support is insufficient.
“When the chancellor delivers the Autumn Statement next week, his priority must be in helping those who need it most. The vulnerable, and small business owners are running out of steam, and for many, a nightmare before Christmas is becoming a reality.”
