Consumer Price Inflation, UK - October 2022
16th November 2022
The Consumer Prices Index including owner occupiers' housing costs (CPIH) rose by 9.6% in the 12 months to October 2022, up from 8.8% in September 2022.
The largest upward contributions to the annual CPIH inflation rate in October 2022 came from housing and household services (principally from electricity, gas, and other fuels), food and non-alcoholic beverages, and transport (principally motor fuels).
On a monthly basis, CPIH rose by 1.6% in October 2022, compared with a rise of 0.9% in October 2021.
The Consumer Prices Index (CPI) rose by 11.1% in the 12 months to October 2022, up from 10.1% in September 2022.
On a monthly basis, CPI rose by 2.0% in October 2022, compared with a rise of 1.1% in October 2021.
Despite the introduction of the government's Energy Price Guarantee, gas and electricity prices made the largest upward contribution to the change in both the CPIH and CPI annual inflation rates between September and October 2022.
Rising food prices also made a large upward contribution to change with transport (principally motor fuels and second-hand car prices) making the largest, partially offsetting, downward contribution to the change in the rates.
The Consumer Prices Index including owner occupiers' housing costs (CPIH) rose by 9.6% in the 12 months to October 2022, up from 8.8% in September 2022. The annual inflation rate was last higher in the constructed historical estimates in December 1980, when it stood at 9.8%. On a monthly basis, CPIH rose by 1.6% in October 2022, compared with a rise of 0.9% in the same month a year earlier.
The Consumer Prices Index (CPI) rose by 11.1% in the 12 months to October 2022, up from 10.1% in September 2022. In October 2022, the CPI annual inflation rate was the highest annual CPI inflation rate in the National Statistic series, which began in January 1997. Indicative modelled consumer price inflation estimates suggest that the CPI rate would have last been higher in October 1981, where the estimate for the annual inflation rate was 11.2%.
The CPI monthly rate was 2.0% in October 2022, compared with 1.1% in October 2021. This means that, between September and October 2022, the prices of goods and services bought or consumed by UK households have increased by 2.0%. This matched the annual CPI inflation rate in July 2021, meaning prices rose between September and October 2022 by as much as they did in the entire year to July 2021.
The largest contribution to the annual rate in October 2022 for both CPIH and CPI came from housing and household services. Other large contributions came from food and non-alcoholic beverages, and from transport.
Despite the introduction of the government's Energy Price Guarantee, gas and electricity prices made the largest upward contribution to the change in both the CPIH and CPI annual inflation rates between September and October 2022. The second largest upward contribution to the change came from rising food prices, while transport (principally motor fuels and second-hand cars) made the largest offsetting downward contribution. We consider these movements in more detail in Section 3.
The main drivers of the annual inflation rate for CPIH and CPI are the same where they are common to both measures. However, the owner occupiers' housing costs (OOH) component accounts for around 17% of the CPIH, and it is the main driver for differences between the CPIH and CPI inflation rates. This makes CPIH our most comprehensive measure of inflation, and it is covered in more detail in Section 4 in this bulletin, while Section 5 provides commentary on the CPI.
Housing and household services
Overall, the cost of housing and household services rose 11.7% in the 12 months to October 2022, up from 9.3% in September 2022. This CPIH annual increase is the highest on record, including the modelled estimates. In October 1975, it is estimated that housing and household services inflation reached 11.4%, which was the previous record for this division since the modelled series began in 1950.
This increase followed the introduction of the government's Energy Price Guarantee (EPG), which will be in place from 1 October 2022 until 31 March 2023. Energy prices rose for households in Great Britain, however, the rise was constrained by fixing the unit cost of electricity and gas. Under the EPG, the average unit cost (for a customer with typical usage, paying by direct debit) of gas rose from 7.8 pence per kilowatt hour (p/kWh) to 10.3 p/kWh, and electricity rose from 27.2 p/kWh to 34.0 p/kWh. However, without the EPG, the average unit prices for gas and electricity were expected to rise to 14.8 p/kWh and 51.9 p/kWh, respectively.
The average standing charges for customers on default tariffs will remain capped in line with the levels set (in Great Britain) by Ofgem for the default tariff cap from 1 October 2022, at 46p per day for electricity and 28p per day for gas, for a typical dual fuel customer paying by direct debit. It was forecast that a typical UK household will now pay up to an average £2,500 a year under the EPG. The introduction of the EPG meant that overall electricity, gas and other fuels prices rose by 24.3% between September and October 2022, with gas prices rising by 36.9% and electricity prices by 16.9%. As an indicative estimate, without the implementation of the EPG, electricity, gas and other fuels prices would have risen by nearly 75% between September and October 2022 (instead of 24%). This would have increased the contribution to the 12-month inflation rate from electricity, gas and other fuels from 2.59 percentage points to nearly 4.8 percentage points, taking the October 2022 headline rate for CPIH up to approximately 11.8%.
In October 2022, households are paying, on average, 88.9% more for their electricity, gas, and other fuels than they were paying a year ago. Domestic gas prices have seen the largest increase, with prices in October 2022 being more than double the price a year earlier. The prices for liquid fuels and for electricity have risen by 70.0% and 65.7%, respectively, in the year to October 2022.
We have also noted increases to the price of solid fuels (including smokeless fuels). The prices for this item tend not to increase from year to year but, since the start of the year, we have seen notable increases, with prices in October 2022 being 36.4% higher than a year ago, perhaps because of households seeking alternative forms of heating.
Food and non-alcoholic beverages
Food and non-alcoholic beverage prices rose by 16.4% in the 12 months to October 2022, up from 14.6% in September 2022. The annual rate of inflation for this category has continued to rise for the last 15 consecutive months, from negative 0.6% in July 2021. The current rate is estimated to be the highest since September 1977, when the food and non-alcoholic beverages annual inflation rate was 17.6%, as presented in the consumer price inflation extended historic series.
The increase in the annual rate for food and non-alcoholic beverages between September and October 2022 was driven by price movements across 10 of the 11 more detailed classes. The largest upward effect came from milk, cheese, and eggs, where prices for shop-bought milk and cheddar cheese rose between September and October 2022 but by more than between the same two months in 2021.
Overall prices for food and non-alcoholic beverages have risen throughout 2022. Despite prices rising more slowly (by 1.1%) between August and September 2022, there was a resurgence in the monthly increase between September and October 2022; prices increased by 2.0%, which is the second monthly increase of 2% or more this year.
Recreation and culture
There was an overall upward contribution of 0.06 percentage points to the change in the annual inflation rate from the recreation and culture section. The largest upward contribution (of 0.06 percentage points) came from audio-visual equipment and related products, principally recording media. Price movements for some recording media items can sometimes be large, in part depending on the composition of bestseller charts, so short-term movements need to be interpreted with caution.
There were smaller upward contributions from cultural services and books, where prices overall rose between September and October 2022, but fell between the same two months in 2021. These upward contributions were partially offset by a downwards effect from across the other recreational items, garden and pets grouping, where prices overall fell between September and October 2022 but rose between the same two months in 2021.
Transport
The annual inflation rate for transport was 9.3% in October 2022, down for a fourth consecutive month from a peak of 15.2% in June 2022. Prices were unchanged between September and October 2022 but had increased by 1.5% in 2021. This resulted in a 0.18 percentage point downward contribution to the change in the annual inflation rate.
Unlike recent months, where the downward movement in the transport division has been dominated by falling motor fuel prices, in October 2022, there were large downward effects from both motor fuels (a downward contribution of 0.09 percentage points) and second-hand cars (0.07 percentage points)
Overall, fuel prices fell by 0.5% between September and October 2022 but prices at the pump were still 22.2% more expensive than they were in October 2021. For the individual fuel types, the movements for petrol and diesel were noticeably different.
Average petrol and diesel prices stood at 163.6 and 183.9 pence per litre, respectively, in October 2022, compared with 138.6 and 142.2 pence per litre a year earlier. While prices remain higher than a year ago, petrol prices fell by 2.9 pence per litre on the month while diesel prices rose by 2.3 pence per litre. This has resulted in a notable 20.3 pence per litre difference between diesel and petrol prices - the largest difference since our recorded series began in 2004. Anecdotally, this could be a consequence of a surge in global demand for diesel for electricity production.
The price of second-hand cars fell by 0.6% between September and October 2022, compared with a 4.6% rise in prices between the same months in 2021. Prices had risen significantly between May and November 2021 because of increased demand following the coronavirus (COVID-19) pandemic, lower levels of second-hand car stock, and the global semiconductor microchip shortage. This month's fall in prices meant they fell below the level of last October. This is the first month since before the pandemic that second-hand car prices have been cheaper than they were a year ago.
Note
To read the full ONS report go HERE
