Lower utility bills, tamped down by the energy price cap, pushed the UK’s inflation to a three-year low in October.
Gas prices fell 8.7% and electricity prices dropped 2.2% between September and October, according to data from the Office for National Statics (ONS). The energy price cap was readjusted downward by Ofgem on October 1, with those on default tariffs seeing an average of £75 of savings on their annual energy bills.
Ofgem said it lowered the cap in response to falling wholesale energy prices. The current level of the price cap, applicable to the 15 million households on standard variable and default tariffs, will last until 1 April 2020.
Electricity price inflation is now at 3.3%, its lowest level in two years.
Meanwhile, petrol is 4p cheaper a litre than it was a year ago.
Lower utility bills meant the Consumer Price Index rose just 1.5% year-on-year in October, the smallest rise since November 2016 and down from 1.7% in September. It was also lower than the 1.6% economists had forecast for the month.
Goods and services in the furniture, household equipment and maintenance and recreation and culture sectors also experienced a slowdown in price growth. Prices of games and toys rose by just 1% last month, down from 2.5% in September and ahead of the Christmas shopping flurry. Prices of books were down 3.8%.
However, some of those cuts were offset by a 1% price rise in footwear and clothing, with particular increases on the tags of women’s formal trousers and branded sneakers.
Food prices were up 0.9%, a slowdown from previous months, with cheaper bread, pizza, pork, fish, milk and fruit all helping families at the tills.
Meanwhile, the Retail Price Index (RPI), another measure of inflation, fell 2.1% last month, from 2.4% in September.
As inflation has fallen, wages have risen, with average earnings up 3.6% in the year to September, giving Britons more purchasing power.
But while the energy price cap has lowered utility bills and dampened inflation, it’s been a controversial intervention. On Wednesday British Gas owner Centrica, backed by four fellow Big Six suppliers, won a legal challenge against the way the price cap was calculated.
Ofgem said it was considering its response to the judgement and insisted that the ruling wouldn’t affect the fundamentals of the price cap, which is due to run until at least 2023.
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