Inflation turns negative again

Yet again this year, inflation – as measured by the Consumer Prices Index (CPI) – has turned negative, albeit to a marginal minus 0.1%; according to the latest release of data for September from the Office for National Statistics (ONS). The last time the CPI was in negative territory was in April of this year, again at minus 0.1%. As a direct result of this fall, many working age welfare benefits, such as disability and carer’s allowances, together with public sector pensions, and any pension payments received from the state second pension, will be frozen. These are all linked to September’s CPI figure. However, it is important to note that the basic state pension is protected, via the Government’s ‘triple-lock’ promise, so this will rise by at least 2.5%. A major factor in the reduction in the CPI rate in the year to September was the 2.5% fall recorded in food prices, mainly as a result of the continuing supermarket price war, which now sees food prices falling for the last 15 months. Additionally, the 3.7p per litre fall in the price of fuel, and the price of diesel now averaging 110.2p per litre, mean fuel is now at its lowest level for nearly six years. As a direct result of the lower oil prices, there was a complementary fall in the price of domestic gas supplies. The wider Retail Prices Index (RPI), which includes housing costs, also fell to 0.8% in September, compared to the 1.1% it recorded in August. Given this benign inflationary outlook in the UK, it is probably fair to assume that the Bank of England are under little pressure to raise interest rates, as they believe that inflation will not edge up to 1% until at least the Spring of 2016 and will remain below their own CPI target of 2% for some time.
Markets – October (Data supplied by The Outsourced Marketing Department) October saw a return of confidence in the global equity markets following the previous two months of losses seen in the summer sell-off. Here in the UK the first full trading week of October saw the FTSE100 bounce back with its strongest performance seen for four years. The index gained 286.2 points, or 4.7%, having survived that sell-off. This was its best performance since the week ending December 2nd 2011, when it gained 7.5%. Over the remainder of the month it gained a fraction under 300 points to close up 4.94% at 6,361.1. The wider FTSE250 also improved by 434 points, finishing at 17,117.2 – for a gain of 2.6%, and the junior AIM market rose by just over 12 points, or 1.74%, to end at 737.9. Across the pond the Dow Jones Index rose by 1,378 points for a gain of 8.47% to close the month at 17,663.54, whilst the mainly technology based Nasdaq also saw a gain of 9.38%, or 433 points, finishing October at 5,053.75. On the continent, renewed confidence in the economic outlook there, together with hints of renewed fiscal stimulus from the European Central Bank, drove the Eurostoxx50 up by 10.24%, to close out at 3,418.23, reversing the 5.49% loss it encountered in September. The Japanese Nikkei225 index also recovered lost ground, finishing the month at 19,083.10, a lift of 1,695 points or 9.75%
The foreign exchange markets saw sterling in favour, gaining 2.65% against the US Dollar to $1.55 and 3.7% against the Euro to €1.40. This meant the Euro itself lost some ground against the US Dollar to finish at $1.10, a dip 5 of 0.9%.

Gold regained most of the ground it lost in 4 September, rising to $1,141.36 a troy ounce, 3 £bn for a gain of 2.5%.

Meanwhile, ‘black gold’ – oil, as measured by the Brent Crude benchmark – recovered a little ground, rising by 80 cents a barrel to 0 $49.56. However, the price of oil still remains down 13.55% on the year to date.

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