inflation

This ties in with Donald Trump, by the way.

But before we get to The Donald, here are some hard numbers. Headline inflation in October was 0.9 per cent, from 1.0 per cent in September. This was less than expected by the consensus of economists, and less than the Bank of England had expected.

So far we have reason to cheer.

There are many reasons to be concerned over a Donald Trump presidency – but in one respect, stated fears are odd. Critics of the UK government, critics of the Republican Party, and critics of austerity have been urging governments to implement a massive stimulus programme involving investment into infrastructure. Now that Mr Trump has outlined this very idea he is being slated by his critics, many of whom are the very same people who have been calling out for a massive fiscal stimulus involving investment into infrastructure, because they say it may lead to inflation.

Well maybe it will, but you can’t have your ‘I hate Trump’ cake and eat it.

And the fall in UK core inflation may suggest that underlying inflation pressure remains so weak that there is little or no chance of massive fiscal stimulus sparking off inflation. Okay, we are not comparing like with like. The UK and US are not the same, but the similarities are enough, all the same.

Now we get to the catch. It seems that the fall in core inflation, which remember is meant to strip out one-offs, was caused by a fall in one-offs, namely the rise in the university fee cap from 2012 having less and less impact, and clothing price changes.

In the longer term, core inflation is key. But in the medium term, headline inflation matters. And thanks to the falling pound – which admittedly has reversed some of its falls in recent days – headline inflation is expected to rise sharply next year. Bear in mind that there are time lags between a fall in a currency and the resulting change in inflation.

And as headline inflation rises, most of us will feel worse off, unless that is wages rise in tandem, which seems unlikely.

So what might inflation rise to, before falling back?

Scott Bowman, UK Economist at Capital Economics said: "We think inflation will peak at about 3.2 per cent in the first half of 2018. This rise in inflation will eat into households’ real incomes and lead to a slowdown in consumer spending growth. However, support from low interest rates, and a probable easing of the fiscal squeeze in next week’s Autumn Statement, should ensure that spending growth doesn’t slow too sharply."

Samuel Tombs, Chief UK Economist at Pantheon Macroeconomics said: "Despite October’s weak number, CPI inflation remains set to make big strides towards the 2 per cent target over the next three months, as the anniversary of sharp falls in motor fuel and food prices is reached. Thereafter, sterling’s depreciation will begin to push inflation up sharply, utility companies will respond to the recent rise in wholesale energy prices by lifting consumer tariffs, and services inflation likely will continue to grind higher as firms grapple with big increases in minimum wages and non-wage labour costs. As a result, we still expect CPI inflation to peak at about 3.5 per cent by the end of 2017, crippling consumers and preventing the MPC from announcing more stimulus.”