UK consumer price inflation accelerates and borrowing tops forecast

UK consumer price inflation was hotter than expected, according to numbers on Wednesday, while separate figures showed public sector borrowing was higher than forecast, giving Chancellor John Healey some food for thought ahead of next week's budget.

The Office for National Statistics said the annual consumer price inflation rate accelerated to 3.5% in September, from 3.1% in August. The September reading topped the FXStreet-cited consensus of 3.4%.

It was the quickest pace of yearly consumer price growth since October 2025.

On a monthly basis, consumer prices rose 0.4% in September, having climbed 0.5% in August from July.

September's reading was above the FXStreet-cited forecast of a 0.3% rise.

The ONS said the largest contributions to the annual inflation pick-up came from transport, particularly motor fuels.

"Restaurants and hotels made the largest, partially offsetting, downward contribution," the ONS said.

The rate of annual producer input price inflation accelerated to 8.3% in September from 6.7% in August.

"Crude oil provided the largest contribution to the rise in the annual inflation rate for input prices in September 2026, with prices increasing by 14% on the month," the ONS said.

It was the loftiest rate of producer price inflation since May.

The next Bank of England decision is on November 5.

Separate figures on Wednesday showed public sector borrowing rose to £24.52 billion in September, from £17.25 billion in August. August's figure was downwardly revised from around £18.3 billion

Borrowing for September was above the prior year's £22.76 billion.

"Spending, including higher debt interest costs, increased more than government income, partly reflecting the impacts of inflation," the ONS said.

"Borrowing in the financial year to September 2026 remained below the same period last year, although it was higher than the Office for Budget Responsibility's forecast."

Borrowing was £97.8 billion in the financial year up to September, down 4.3% on-year, but £6.0 billion above an Office for Budget Responsibility forecast. The UK financial year runs from April 1 to March 31.

The budget, the first under the new Andy Burnham government, is outlined by Chancellor Healey next week Wednesday.

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