The increase in the cost of living eased last month, official figures revealed today, but soaring energy bills continued to squeeze household budgets.
The Consumer Price Index (CPI) rate of inflation fell to 5.0% in October, the Office for National Statistics (ONS) said, slightly down on the three-year high of 5.2% in September but still more than double the Government’s 2% target.
Heavy discounting by the UK’s biggest supermarkets, which have been engaged in an aggressive price war, saw the biggest fall in food prices for a September to October period since 1996, the ONS said.
But another utility tariff hike from big six supplier npower continued to pile pressure on consumers, who are struggling to cope with average wage growth far below the rate of inflation.
The elevated CPI figure will trigger an explanation letter to the Chancellor from Bank of England Governor Sir Mervyn King, who is at Buckingham Palace today to be formally knighted by the Queen.
Sir Mervyn and fellow members of the Bank's Monetary Policy Committee (MPC) will not be surprised by the high rate of CPI as they previously forecast inflation to surpass 5% before it comes down rapidly over the next year.
The Bank is expected to slash its forecasts for growth and inflation in its quarterly inflation report tomorrow, as a raft of key indicators all point towards the economy heading into reverse.
The weaker growth outlook is likely to push down the inflation projection - but this will be slightly offset by the impact of the £75 billion round of quantitative easing unleashed in October.
Gas and electricity bills applied the most significant upward pressure on the overall rate of inflation in October, rising 1.4% and 1.5% respectively.
The surge came as npower introduced a price hike, following previous rises from British Gas, SSE, Scottish Power and E.ON.
EDF, which increases bills this month, will impact November’s inflation figures, the ONS said.
Food prices had the most significant downward impact to the change in CPI between September and October as they fell 0.9%.
The ONS said "significant and widespread discounting by supermarkets" pushed prices down, as well as a strong harvest for certain products.
Vegetable prices fell 2.4%, fruit eased 1.6%, milk, cheese and eggs dropped 1.2% and meat edged down 0.7%.
Tesco triggered a price war with its rivals in October with its £500 million Big Price Drop campaign.
Competitors soon responded with their own schemes, including Sainsbury’s Brand Match campaign, while Asda slashing prices at the petrol pumps.
Elsewhere, a 6% fall in air fares and a slight 0.4% dip in petrol pump prices brought the overall CPI rate down. The average price of petrol was £1.34 in October, the lowest since July.
The data was published as Prime Minister David Cameron faced a damaging Commons revolt by Tory MPs over rising fuel prices.
A Treasury spokesman said: ``Whilst price inflation eased slightly in October, the Government recognises that these are difficult times for households as prices continue to be affected by conditions in the global oil and gas markets.
"The Bank of England has forecast that inflation should fall rapidly over 2012 but, in the meantime, the Government is taking action to help consumers with current high costs, including cutting fuel duty and freezing council tax."
