The Consumer Prices Index (CPI) rose by 3.5% in the 12 months to September 2026, up from 3.1% the previous month. On a monthly basis, CPI rose by 0.4% in September 2026, compared with little change in September 2025.
Food inflation holds steady
The 12-month inflation rate for food and non-alcoholic beverages held steady at 1.3% in September 2026. The rate was last lower in September 2021, when it was 0.8%. On a monthly basis, food and non-alcoholic beverage prices fell by 0.2% in September 2026, the same fall as in September 2025.
Responding to the figures, Harvir Dhillon, lead economist at the British Retail Consortium (BRC), said: “With Christmas around the corner, consumers will be understandably concerned by the third increase in inflation in three months. A large part of this is the sharp rise in petrol and diesel prices.
Energy costs set to push up October figure
“The lifting of the Ofgem price cap this month will push up October’s figure when published in November, having already driven up household energy bills and likely to do so again in January. Rises in the cost of household appliances and pharmaceuticals will further squeeze household budgets.
“However, intense competition between supermarkets has helped hold inflation steady for consumers despite a multitude of supply chain shocks this year. This stability was anchored by drops in the price of butter, coffee and potatoes, helping to ease the pressure on consumers.
Business rates uplift concern
“Retailers and government are aligned on the need to tackle the high cost of living, and next week’s Budget provides a crucial opportunity to do just that. If government can cut the cost of doing business, retailers will be in a better position to hold back price rises and increase investment in stores and jobs.
“However, today’s figures, which determine April 2027’s business rates uplift, mean retailers are on the line for around £250m in additional bills, unless action is taken.
“Now is not the time to pile on millions in extra costs, and If the chancellor is serious about reducing the cost of living, he must freeze rates for the year ahead. Cut the costs on businesses and will be families who ultimately benefit.”
Industry and analyst views
James Walton, chief economist at IGD, commented: “Whilst food price inflation has stayed at 1.3%, it is hard to take much comfort as cost pressures continue to build across the food supply chain.
“Retailers are likely offsetting rising costs from geopolitical, regulatory and climate impacts to protect prices for shoppers, particularly ahead of the critical Christmas sales period.
“These cost pressures are placing immense strain on businesses and squeezing margins throughout the supply chain. It is hard to see how this can be maintained longer term, and our data shows that 79% of shoppers expect food prices to rise next year.
“Ultimately, a more resilient food system, with greater domestic capacity, is key to supporting price stability. The industry will be looking to the Budget to see how far the chancellor can support businesses and shoppers against a challenging financial outlook.”
Tera Allas, senior economic advisor, McKinsey & Company, said: “Households are seeing faster price increases on the things they have less flexibility to cut back on. September’s inflation data show that essentials inflation is now 4.8%, compared with 2.3% for other goods and services. A year ago, prices in both categories were rising at broadly similar rates.
“Average household savings buffers remain 8% above pre-pandemic levels, although that resilience is unevenly distributed. This suggests there is spending power that could return to the economy if households become more confident about spending.”
Bogdan Toma, partner, head of consumer practice, McKinsey & Company said: “Food inflation surprisingly remains flat at 1.3%, significantly below CPI at 3.5%. This suggests grocery retailers are fiercely competing and absorbing cost rises. However, pressures from higher energy prices are expected to show up at the checkout in the coming months.
“Motor fuel inflation rate is at its highest level in over four years, further squeezing household budgets ahead of the peak retail trading season.”
“Many retailers placed their seasonal stock orders months ago. If demand disappoints, they may need to discount earlier, more deeply or for longer to compete for shoppers’ spending. For fashion and consumer electronics retailers, November and December can determine profitability for the entire year. Heavy discounting could put that at risk.”
