The UK inflation rate dropped to a three-and-a-half year low in September 2024, according to the latest data from the Office for National Statistics (ONS).
- M-O-M: Consumer prices remained flat in September, following a modest 0.3% rise in August, making it the third-best month for inflation this year.
- Y-O-Y: The Consumer Prices Index (CPI) rose by 1.7% in the 12 months to September 2024, a significant decrease from August’s 2.2% and the lowest inflation level since March 2021.
Breaking It Down: The decline was largely driven by a drop in transport costs, with notable reductions in airfares and motor fuels contributing to the decrease. Meanwhile, food and non-alcoholic beverages provided the largest upward pressure on inflation, partially offsetting the downward trend.
The Core: Despite the overall annual decline, core inflation—excluding energy, food, alcohol, and tobacco—remains elevated. Core CPI rose by 3.2% in the 12 months to September, down from 3.6% in August.
- Goods prices continue to be depressed, with the CPI goods annual rate falling further into negative territory, from -0.9% in August to -1.4% in September.
- Meanwhile, services inflation, though still high, also dropped, with the CPI services annual rate falling from 5.6% to 4.9%.
Similiar Problems: This inflation pattern mirrors trends in the U.S., where goods prices remain weak, while services inflation stays strong. Housing costs are another point of concern for the UK, similar to the U.S. The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 2.6% in the 12 months to September, down from 3.1% in August. The core CPIH inflation rate also eased to 4.0% from 4.3% in August.
Bottom Line: While falling inflation is good news for consumers, elevated rates and housing prices continue to pose challenges. The UK’s adjustable mortgage rates have led to some relief in housing costs, but the overall cost of living remains a key issue for many households. The inflation data signals some progress, but with core inflation still stubbornly high, concerns over affordability are likely to persist.
