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Economy

Lower energy prices sees inflation drop to 4.6%

The decrease in the rate between September and October 2023 reflected downward effects from gas and electricity. Gas costs fell by 31.0% in the year to October 2023, compared with a rise of 1.7% in September

UK Inflation slowed sharply to 4.6% in October, beating economists expectations, thanks to a marked reduction in energy prices.

According to the latest figures of the Office of National Statistics, 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. This resulted in an easing in the annual rate to 1.9% in October 2023, down from 5.7% in September and a peak of 11.8% in January and February.

The decrease in the rate between September and October 2023 reflected downward effects from gas and electricity. Gas costs fell by 31.0% in the year to October 2023, compared with a rise of 1.7% in September. Electricity costs fell by 15.6% in the year to October 2023, compared with a rise of 6.7% in September. Both mark the lowest annual rate since records began in January 1989.

Although electricity and gas prices have fallen on the month and the year, prices are still high in comparison with 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. Electricity, gas and other fuels fell by 6.9% between September and October 2023 and were down 21.7% on the year.

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Meanwhile, Food and non-alcoholic beverage prices rose by 0.1% between September and October 2023 following a 0.1% decline the previous month; this compares with a rise of 2.0% between the same two months a year ago.

This saw an easing in the annual rate to 10.1% in October 2023, down from 12.2% in September and a recent high of 19.2% in March 2023, the highest annual rate seen for over 45 years.

The largest downward contributions came from the milk, cheese and eggs category and the vegetables category.

ONS chief economist Grant Fitzner said: “Inflation fell substantially on the month as last year’s steep rise in energy costs has been followed by a small reduction in the energy price cap this year.

“Food prices were little changed on the month, after rising this time last year, while hotel prices fell, both helping to push inflation to its lowest rate for two years.The cost of goods leaving factories rose on the month. However, the annual growth was slightly negative, led by petroleum and basic metal products.”

 

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