Annual inflation rate rises to 0.7% in October

Andrew Cummings
November 18, 2020

Annual inflation accelerated to 0.7 per cent, from 0.5 per cent in September, Statistics Canada reported Wednesday in Ottawa.

The Consumer Prices Index (CPI) measure of inflation in the United Kingdom was 0.7% higher year-on-year in October 2020, up from 0.5% in September and a beat on consensus market expectations for a reading of 0.60%.

The rate of inflation increased slightly as clothing prices grew, returning to their normal seasonal pattern after the disruption this year.

The monthly rise was nearly entirely driven by rising food prices, particularly lettuce and fresh or frozen chicken, Statistics Canada says.

CPI inflation creeps up to 0.7 per cent as prices of food and clothing rise

The 25.6 per cent annualized increase in the former was largely a result of supply issues.

United Kingdom inflation bounced higher last month as the price of food and clothing went up, according to official figures.

A rise in clothing, food and furniture prices pushed inflation up in the United Kingdom slightly in October, although official figures say it remains at historically low levels.

The ONS said eight items it looked at in its inflation basket a year ago were unavailable to consumers this time around due to COVID-19 restrictions.

One of the largest downward pressures on inflation came from a fall in household energy prices.

Some sectors may see big price increases for hot items such as equipment for a home gym or outdoor furniture, but Porter said it won't be enough to drive up overall inflation.

"However, the "fundamental" drivers of housing demand are strong, and we are in an environment of low interest rates, with reduced rates of new buildings coming onto the market and limited existing stock".

"Despite the rise in October inflation, the headline rate of CPI continues to remain well below the Bank of England's 2% target as mandated to it by the United Kingdom government".

Vivek Paul, UK chief investment strategist at the BlackRock Investment Institute, said the October inflation data was "something of a red herring given the stop-start nature of the economic recovery".

Suren Thiru, head of economics at the British Chambers of Commerce, said despite the increase in October, the inflation is expected to drop again as the further lockdown restrictions are being implemented.

That may force the central bank to leave stimulus in the economy for a little longer to help coax inflation back up to its comfort zone of two per cent, he wrote in a note.

"The Bank of Canada's preferred core measures ("trim", "median", and "common") that control for the volatility in individual price components ticked up a tenth in October, averaging at 1.8% year over year". "Indeed, in Q4 2021 inflation is predicted to hit 2.1%, and today the best fixed rates on the market are a five and seven-year fixed bond from Bank of London and The Middle East at 1.50% as an expected profit rate".

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