UK inflation rate rises to 1.3% in October from a 5 year low

UK inflation rate rises to 1.3% in October from a 5 year low, up from 1.2% in the previous month, official figures show.

British inflation edged up but prices are expected to weaken again soon, partly resulting why the Bank of England is signalling it won’t start to raise interest rates until well into late next year or possibly later.

The slump in inflation in recent months has given some respite to British households. Earnings rose by more than prices in September, even if only slightly.

The Office for National Statistics (ONS), said the marginal rise was because transport costs fell by less than they did a year ago. In addition, higher prices in the recreation and culture sectors, particularly for computer games and toys also contributed to inflation’s rise.

However, the price of food and non-alcoholic beverages fell by 1.4% in October, when compared with last year, marking the sixth consecutive month without a rise – the longest run of declines since 2000 as supermarkets engage in a price war and global food costs fall. Retail analysts Kantar Worldpanel said “Price competition had pushed down grocery prices by 0.4%.”

Furniture and household equipment prices also fell, by 1.1%, most notably three-piece suites and settees.

Separate ONS data showed house prices in Britain rose 12.1 percent in yearly terms in September, compared with an increase of 11.7 percent in August. Other, more up-to-date surveys have shown the rapid pace of house price growth starting to cool.

In London, property prices rose by 18.8 percent in September, slowing from an increase of 19.6 percent in August.

The pound, which has weakened recently against the dollar as the prospect of rate hikes moved further away, rose slightly.

Many economists predict inflation will resume its decline soon, in part because of falling oil prices. David Kern Chief economist, British Chambers of Commerce says ‘the impact of low oil prices will have a noticeable impact in coming months, causing inflation to drop’.