United Kingdom consumer prices edge down for second month in a row

The Labour Department said yesterday the consumer price index (CPI) increased 0.2 per cent last month, reversing September’s 0.2 per cent drop. The Office for National Statistics calculates inflation excluding items – such as energy and food – where prices can fluctuate because of what is happening on global markets.

The consumer price index, or cost of living, increased by a seasonally adjusted 0.2% in October, the government said Tuesday.

The US Commerce Department reported that consumer prices increased by 0.2% last month, matching forecasts and following a fall of 0.2% in September. Wholesale industrial prices for October increased by 1.2% month-to-month and for Jan-Oct by 32.6% year-on-year.

The Fed’s preferred measure of inflation, personal consumption expenditures, has less of an emphasis on housing costs and has risen just 0.2 percent from a year ago. Including the volatile food and fuel categories, the index also advanced 0.2 percent, the first gain in three months.

Adding that economic growth is likely to be weaker than expected this year and next (at 2.7 and 2.5 per cent respectively), Bank Governor Mark Carney gave rise to speculation that interest rates could remain at rock-bottom right through 2016.

A further weak set of Chinese inflation figures underlined concerns about a slowdown in the Chinese economy on Tuesday.

Analysts have been eyeing inflation to see whether it will show enough strength to justify the Federal Reserve embarking on its first increases in interest rates in more than nine years. Unless that decline is repeated this November – which it won’t be – the annual inflation rate will mechanically rise.

For most of the last 10 years (a short period in 2009 notwithstanding), core inflation has been lower than overall inflation.

Cheaper gas helped lower consumer prices in the Seattle area in September and October, although the cost of food and shelter edged up.

This is largely due to the effect of the near tripling of university tuition fees in 2012, from £3,600 to £9,000 per year, working its way through the system with the bulk of students now paying the higher rate.

In a sign that a few parts of the economy are booming, Britain also saw its fastest rise in house prices since March.

Inflation is based on a basket of goods and services, measuring the average price across the board of those products.

Rents continued to increase, rising 0.3%.

Meanwhile, real hourly earnings rose 2.4% vs. a year earlier, the fourth straight month of acceleration and the highest since April.