Inflation rises by half a per cent

CPI now stands at 2.7 per cent.

The ONS has released the inflation report for this month. It's up. A lot:

The Consumer Prices Index (CPI) annual inflation stands at 2.7 per cent in October 2012, up from 2.2 per cent in September. The main upward pressure came from the education sector (university tuition fees) with smaller upward contributions from food & non-alcoholic beverages and transport. These were partially offset by downward pressures from the housing & household services, recreation and miscellaneous goods & services sectors.

The Retail Prices Index (RPI) annual inflation stands at 3.2 per cent in October 2012, up from 2.6 per cent in September.

That's the highest since May for the CPI, and 0.4 points higher than the consensus estimate (which was for 2.3 per cent for RPI and CPI). The fact that the main upward pressure came from tuition fees means that this rise is almost entirely due to the government's own decisions – and also that it is all-but-guaranteed to fall by an equivalent amount in a years time.

The extent of the effect of rising tuition fees is clear in this chart, which breaks down the various contributions of different spending categories on inflation:

This is a crisis of a sort: It is also important to point out that this now leaves inflation again racing ahead of wage growth, by a full percentage point (wage inflation stood at 1.7 per cent in the last estimate); and the idea of a "misery index" - compounding the effects of inflation and unemployment together to see the pain the economic climate inflicts on the typical person - indicates that this rise will wipe out recent goodwill gained from the falling unemployment rate. But it is not a macroeconomic crisis; without the government's short-sighted actions in 2010, this rise would be just 0.1 per cent, easily enough to argue that low inflation is here to stay. We'll see next month what happens to the overall trend.

Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club, comments:

This is a very nasty surprise. We had expected inflation to pick up in October because of the rise in tuition fees and food prices, but the scale of the increase was surprisingly large. 

Further out we are still confident that inflation will slow back towards the target. And because of the causes of the October increase, it could be argued that these figures aren’t quite as bad for household finances as they may first appear. They represent a significant squeeze for those affected directly by the tuition fee increase, however the vast majority of people will not have been impacted. 

Finally, it is worth pointing out that the inflation target is a symmetrical one. The Bank of England's mandate is to bring inflation to 2 per cent, and it must write a letter to the chancellor explaining why it has failed if it is more than one point away in either direction. If inflation does stay below three per cent, then it remains not much to worry about.

Updated 9:53 and 11:29 with further analysis.

 

A student walks through St John's, Cambridge. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Getty
Show Hide image

Italian PM Matteo Renzi resigns after referendum No vote

Europe's right-wing populists cheered the result. 

Italy's centrist Prime Minister Matteo Renzi was forced to resign late on Sunday after he lost a referendum on constitutional change.

With most ballots counted, 60 per cent of Italians voted No to change, according to the BBC. The turn out was nearly 70 per cent. 

Voters were asked whether they backed a reform to Italy's complex political system, but right-wing populists have interpreted the referendum as a wider poll on the direction of the country.

Before the result, former Ukip leader Nigel Farage tweeted: "Hope the exit polls in Italy are right. This vote looks to me to be more about the Euro than constitutional change."

The leader of France's far-right Front National, Marine Le Pen, tweeted "bravo" to her Eurosceptic "friend" Matteo Salvini, a politician who campaigned for the No vote. She described the referendum result as a "thirst for liberty". 

In his resignation speech, Renzi told reporters he took responsibility for the outcome and added "good luck to us all". 

Since gaining office in 2014, Renzi has been a reformist politician. He introduced same-sex civil unions, made employment laws more flexible and abolished small taxes, and was known by some as "Europe's last Blairite".

However, his proposed constitutional reforms divided opinion even among liberals, because of the way they removed certain checks and balances and handed increased power to the government.

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.