Tuesday, October 15, 2013
Think of an inflation number - it is 2.7%
Posted by David Smith at 11:30 AM
Category: Thoughts and responses

Consumer price inflation was 2.7% in September, the same as in August. The same, in fact, as in seven of the past 12 months. The same, in fact, as its average over the past 12 months. If the Bank of England's inflation target was 2.7%, it would be mightily pleased. It is, of course, 2%.

Does today's 2.7% make any difference to anything? It underlines how sticky the rate is, which eventually might produce a "knockout" forecast of inflation being above 2.5% in 18-24 months time, but not yet. It makes a drop to 2% next year slightly less likely.

There was marginally better news in the retail prices index, which showed inflation slipping from 3.3% to 3.2%. Whichever way you look at it, however, inflation is above average earnings growth.

Input prices fell by 1.2% in September, while output price inflation dropped from 1.7% to 1.2%. Unfortunately the main determinants of consumer price inflation these days are not in these particular pipelines. More on the inflation numbers here.

Also today, the Office for National Statistics released its house price index, showing prices up by 3.8% in the past 12 months and 0.3% on the previous peak. I'm inclined to take this with a pinch of salt. This is a new series and the longer-running Halifax and Nationwide measures still have prices 15% and 8% below previous peaks. The ONS index is here.