Rising prices for services have started to push prices up strongly
Consumer prices were 0.5% higher in October than in the previous month, and 4.4% higher than a year earlier. Accelerating inflation for services, which is related to rising wages, has started to push prices up strongly, and so inflation will average above 3% this year.
The main contributor to the higher annual inflation rate in October was fuel prices, which have been pushing inflation for over a year. The rise in energy prices as a whole has become quite broadly based in recent months, mainly because of the pass-through of the earlier rise in oil prices. Prices have risen for electricity as well as for solid fuels, and the price of heating for housing was up 3% over the month in October.
Price pressures will be reduced in future as the oil price has started to fall on world markets. At the same time though, prices have started to be lifted by higher prices for services, which were up around 5% over the year in October. Part of the rise in services prices comes from transport, especially the volatility in prices for air tickets. Rapid wage growth has also contributed to services inflation. Companies in the services sector find labour shortages to be as severe as they were during the boom ten years ago. The average rise in consumer prices in 2018 will be fast and will be above 3%.