UK inflation unexpectedly falls to 0.9% after warning of sharp rise

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UK inflation slipped back last month after smaller hikes in clothing and footwear prices, according to official figures.

The Office for National Statistics (ONS) said the Consumer Price Index (CPI) measure of inflation was 0.9% in October, down from 1% in September.

Economists had been pencilling in a higher figure of 1.1%.

(Julien Behal/PA)
Consumers were previously warned to expect a sharp rise in the cost of goods and services next year (Julien Behal/PA)

The ONS said there was "no clear evidence" that the plunge in the value of pound since the EU referendum result was bumping up shop prices.

But there were signs that the currency fall was ramping up costs for manufacturers, with the Producer Prices Index (PPI) showing total input prices rising 12.2% in October, compared to a 7.3% rise in September.

The pound's weakness also helped push up output prices to 2.1% last month from 1.3% in September, the ONS said.

It comes as the latest PMI report for the manufacturing industry showed sterling's near 20% slump against the US dollar and 15% fall against the euro since the Brexit vote had triggered the steepest rise in purchasing costs in the survey's 25-year history.

(Kirsty Wigglesworth/PA)
Bank of England Governor Mark Carney is expected to step down from his role in 2018 (Kirsty Wigglesworth/PA)

Mike Prestwood, ONS head of inflation, said: "After initially pushing up the prices of raw materials, the recent fall in the value of the pound is now starting to boost the price of goods leaving factories as well.

"However, aside from fuel, there is no clear evidence that these pressures have so far fed through to the prices in shops."

The Retail Prices Index (RPI) - a separate measure of inflation, which includes housing costs- was 2% in October, unchanged from September.

Bank of England Governor Mark Carney said earlier this month that Britons should expect sharply higher costs as the Bank's latest forecast showed inflation shooting up to 2.7% next year.