Is inflation slowing?

Whatever happened to the inflation surge? Last month, when the Consumer Prices Index (CPI) surged to 3.2 per cent, the country started fretting about a return to the 1970s. This month’s CPI figure, though, has fallen to a not-very-1970s like 3.1 per cent. Forty five years ago inflation, on a slightly different measure, peaked at over 20 per cent.

So are we really heading for an inflationary surge? It turns out that the biggest contribution to this month’s slight fall in CPI is in restaurant prices. This might come as a surprise to people running restaurants — yesterday the Food and Drink Federation complained of a ‘terrifying’ rise in the costs of running restaurants and hotels, as they searched desperately for staff and had to bear higher energy costs. Input inflation in the hospitality sector, it said, was running at 18 per cent. Sooner or later, these extra costs will have to be passed on to consumers.

So why last month’s fall in restaurant prices? Last September was the month in which the cost of eating out rebounded after the end of the Eat Out to Help Out scheme.