The main reasons for the better-than-expected figures were that food and non-alcoholic drink prices were not up as much as expected, and airfares had fallen from the level in July. This more than offset the rise in fuel at the pumps, which, given the rising price of crude oil, looks like climbing further.
But there are three more positive messages in the data. One is that core producer price inflation – the price charged by manufacturers for their output – is now down to 1.5 per cent. That will feed through the distribution system and eventually pull down the prices people pay for goods. A second is that services inflation is coming down too, and that is something that the Bank is known to be worried about because the services sector is so huge.
And third, the so-called core CPI – which excludes volatile items like energy and food prices – is down to 6.2 per cent, still high but sharply down from the levels of the last four months.
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