U.K. Inflation Nears Three-Year Low

The U.K. Office for National Statistics (ONS) said today that inflation in the country fell to its lowest level in almost three years in September. Annual consumer price inflation slowed to 2.2% last month, in line with economist forecasts. That was the slowest pace of increase since November 2009, and it followed August’s 2.5% reading. Retail price inflation, which includes some housing and tax costs, slipped from 2.9% to 2.6%.

“The rate of inflation has now more than halved since its peak last September, bringing welcome relief to the budgets of families and businesses,” a finance ministry spokesman said.

However, inflation remains above the Bank of England’s 2% target. Furthermore, hefty price increases were announced recently by four of Britain’s six largest energy suppliers but have yet to kick in. Last month’s reading was lower due largely to a sharp rise in gas and electricity prices that drove inflation to a peak of 5.2% in September 2011.

Separately, the ONS said factory gate inflation rose to 2.5%, which was higher than analyst forecasts of 2.2%. Input prices declined 1.2%, as the price of oil and imported metals fell. And house prices grew 1.8% on the year in August, which was down from a 2% increase in July.