Inflation holds at 3.8% – industry reaction

Latest Office for National Statistics (ONS) data has shown that inflation held at  3.8 per cent in the year to September. Core Inflation came in at 3.5% in the 12 months to September, down from the 3.6% in August and below the forecast 3.7% forecast by the market

Commenting on inflation figures for September, ONS Chief Economist Grant Fitzner said “A variety of price movements meant inflation was unchanged overall in September. The largest upward drivers came from petrol prices and airfares, where the fall in prices eased in comparison to last year.

“These were offset by lower prices for a range of recreational and cultural purchases including live events. The cost of food and non-alcoholic drinks also fell for the first time since May last year.

“Meanwhile, the annual rise in the cost of goods leaving factories continued to increase, driven by higher food prices.”

Anna Leach, Chief Economist at the Institute of Directors, said “Lower than expected inflation will bring welcome relief to the Monetary Policy Committee, who have been split on the outlook. We should now be passed the peak of this inflationary cycle for consumers. Weaker energy price inflation and the steady slowdown in wage growth – a key driver of services inflation – should help sustain a further easing in price pressures. But food price inflation is set to carry on rising, which bears with it risks to the outlook.

“The MPC seems likely to hold fire on rates in their next meeting, which falls ahead of the Budget. Price signals remain mixed, with higher price expectations counterbalanced by a weak labour market and subdued confidence amongst businesses and consumers. Given the impact that last year’s Budget had on inflation and confidence – especially through higher employer costs – any rate move is likely to be parked for now.”

George Lagarias, Chief Economist at Forvis Mazars said “We may be seeing the first evidence of inflation finally meeting resistance. Given expectations for an inflation uptick, it’s good news that it remained stable. Importantly, we are seeing prices down in food, beverages, recreation and culture. With unemployment rising, it is now more difficult for inflation to continue its stride upwards, and easier for the Bank of England to consider lowering rates.”

Mike Randall, CEO at Simply Asset Finance, said “Stable inflation and steady GDP growth suggest the economy is holding its ground, with businesses continuing to show remarkable resilience in the face of higher costs. Many SMEs have already adjusted to a new baseline of operating costs and are looking for signs of longer-term stability.

“It’s important now that the Government doesn’t take this resilience for granted. Eighteen months after promising a pro-business agenda, the upcoming Budget is the moment to deliver –  with a clear plan that gives SMEs the confidence to invest and grow.”

Neil Rudge, Chief Banking Officer, Commercial at Shawbrook – “The stubborn rate of inflation combined with the recent uptick in unemployment, presents a challenging backdrop for the Chancellor ahead of the Autumn Budget. The increase in employer NICs this year has clearly intensified pressures on SMEs, and given their central role in driving the UK’s growth ambitions, it is unsurprising to see knock-on effects across the wider economy.

“However many forecasters expect this month’s inflation reading to mark a peak, with price growth easing through 2025. Should this materialise, interest rate cuts are likely to follow, improving conditions for businesses. The forthcoming budget remains pivotal for SMEs, who will be hoping the Chancellor avoids further tax hikes or regulatory burdens that could stifle growth.”