Airfares push downwards
The travel and transport component fell by 0.5% between months (-0.07% CPI effect), reflecting the offsetting impact of airfares versus motor vehicles and petrol prices. International airfares fell 7% MoM (-0.10%) and have now declined by 9% in the past two months combined. Presumably, the drop in prices is due to the Delta variant of COVID-19 and its impact on appetite for travel, although seasonal factors may also be at play. This was offset, though, by motor vehicle prices, which rose 0.3% (0.02% CPI effect), and petrol prices, which rose 1.1% (0.03%). The price of petrol has now risen 14.4% year-to-date, reflecting the surge in global oil and fuel prices thus far in 2021.
Other components that declined MoM are furniture and housewares, which fell 0.5% (-0.03%), and postal and telephone services, which fell 1.9% (-0.03%).
The outlook for the months ahead
The outlook is for inflation to remain close to 4.0%, the upper deviation threshold of the CBI’s inflation target, for a while to come. According to our preliminary forecast, the CPI will rise by 0.3% in October, 0.2% in November, and 0.3% in December. If this forecast materialises, headline inflation will measure 4.4% in December and decline steadily thereafter. We project that it will finally converge with the CBI’s 2.5% target in Q3/2022 and then remain close to target from then on.