The ONS said today that CPI inflation fell from 1.3% in October to 1% in November, a 12-year low. Economists had expected a drop to 1.2%.
The statistics agency hinted that the falling oil price is in part responsible for the drop: the ONS said drops in transport costs, notably for motor fuels and air transport – as well as a fall in second-hand car costs – were a significant contributor to the monthly slowdown.
Drops in the prices of recreational and cultural goods were also a factor, the ONS added.
CPIH, a measure which includes housing costs but which is not a national statistic, also dropped from 1.3% to 1% on the month.
Capital Economics said it is now likely inflation will fall “significantly below” 1% in the coming months, as lower fuel and energy costs put pressure on the headline figure.
“The recent 25% fall in oil prices to below $60 per barrel (pb) from their average level of $79 in November should cause petrol’s contribution to CPI inflation to decline by another 0.3ppts,” said UK economist Paul Hollingsworth.
“What’s more, the freezing of energy bills this winter should mean that energy prices’ contribution to inflation falls from 0.3ppts to zero in December.”
