CPI inflation rises to 0.5% in September

CPIH inflation, the ONS' headline measure which includes owner occupiers’ housing costs, rose from 0.5% in August to 0.7% in September.

Transport costs, and restaurant and café prices, following the end of the Eat Out to Help Out scheme, made the largest upward contributions to the change in the CPIH 12-month inflation rate between August and September.

This was partially offset by smaller downward contributions from furniture, household equipment and maintenance; games, toys and hobbies; and food and non-alcoholic beverages.

Debapratim De, senior economist at Deloitte, commented: “We remain in a deflationary environment, with rising unemployment, weak wage growth and abundant spare capacity. This should maintain downward pressure on inflation, especially as rising Covid-19 cases and tighter local restrictions lead to a renewed squeeze on demand and activity.”

Richard Pearson, director at investment platform EQi, added: “The fact that today’s 0.5% increase in inflation came off the back of the government’s Eat Out To Help scheme in the summer shows just how perilous the country’s economic situation is. A few months ago we were being urged to go out and support businesses in the entertainment and hospitality industry, many of who will be badly affected again by new local lockdowns.

“Also notable is the removal of some items related to travel from the CPI basket as increased restrictions shut down what little recovery there was in the holiday market.

“Sadly this all points to a pretty gloomy winter, although the hope from government – and retailers especially – is that the imposition of new tiered restrictions will stem the spread of the virus enough to open up the country again for a pre-Christmas boost. In fact many online retailers are promoting their festive lines already, with delivery slots being booked-up quickly, so it could be that Christmas will come early for some businesses.”