This morning @ONS released their latest inflation data, showing a big fall in annual CPIH inflation (from 1.1% to 0.5%), the lowest rate since the end of 2015. Quick thread on some of the interesting things from the release below.

The biggest driver of the fall in inflation came from restaurants due to the ‘Eat out to help out’ scheme – which led to headline inflation falling by more than 0.4pp. The scheme closed at the end of August so we should expect the change in prices to largely unwind next month.

But the bigger picture is one of a broad-based slowdown in inflation across most sectors. This reflects the substantial contraction in economic activity during the current crisis, where demand falls appear to be outweighing any effects on restricted supply in the economy.

The weakness in producer price growth (both input and output prices for manufacturers continue to fall) suggests that inflation is unlikely to pick up in the near-term. Low inflation simplifies the Bank of England’s task and allow them to keep providing stimulus to the economy.

Despite low inflation, nominal wage growth has fallen below it. This means families are now facing falls in their wages in real terms, impacting living standards. Achieving real wage growth in the post-crisis recovery will be an important and difficult challenge for policy makers