Source: Sharecast
According to the Office for National Statistics, the consumer price index rose by 3.5% in the 12 months to September, up from 3.1% in August. It was also slightly ahead of forecasts for 3.4%.
The largest upward contribution came from transport, particularly motor fuels, with prices in the segment jumping 6.6%, up from 4.6% a month earlier. The average price of petrol rose to 169.5p per litre, the highest since August 2022, while the cost of diesel was the steepest since July 2022.
Core CPI, which strips out more volatile energy, food, alcohol and tobacco prices, rose by 2.8%, up from 2.5% in August.
Grant Fitzner, chief economist at the ONS, said: “Other upward pressures included airfares and, to a lesser extent, computer games and live events, which are often volatile.
“These were partially offset by the cost of hotel stays, where prices rose by less than this time last year.”
Global energy prices have soared in the wake of war in the Middle East, reigniting inflation pressures. The Bank of England has so far left the cost of borrowing on hold this year, at 3.75%, but is now widely expected to hike rates when its next meets on 5 November. The BoE’s long-term inflation target is 2%.
Martin Sartorius, lead economist at the Confederation of British Industry, said: “September’s rise in inflation means that a rate hike will remain firmly on the table at the Monetary Policy Committee’s next meeting. While there have been limited signs of higher energy costs feeding into domestic price pressures so far, the MPC will likely want to guard against the risk of persistently higher headline inflation becoming embedded in future wage and price-setting behaviour.”
The ONS also confirmed that public sector borrowing had spiked in September, by £1.8bn year-on-year at £24.5bn, as government spending – including higher debt interest costs – increased by more than inflation. Debt at the end of September was provisionally estimated to have exceeded £3trn for the time, although as a proportion of the economy, debt was lower than a year earlier.
Danni Hewson, head of financial analysis at AJ Bell, said: “Rising inflation is a double-edged sword for the government. While it’s helped boost cash coming into the Treasury coffers by £4.5bn, it’s also lifted the benefits bill, wage costs and the amount of interest being paid on all that debt.
“The cost of servicing all that debt is weighing on the UK economy and will act as an uncomfortable straitjacket for John Healey when he comes to deliver his first Budget next week.”
Other data release by the ONS on Wednesday showed an 8.3% hike in producer input prices in the year to September, up from a revised 6.7% gain in August. Factory gate prices spiked 4.6%, the highest since April 2023, up from August’s 3.8% rise. A surge in the price of crude oil was the largest contributory factor.