Inflation fell to 5 per cent in October helped by a price war between major supermarkets, with food and petrol prices being slashed as they competed with each other.

The latest figures from the Office for National Statistics show a 5 per rise in the consumer-price index in the 12 months to October, compared with a rise of 5.2% in September.

The rate of inflation also slowed on the retail prices index to 5.4% in the 12 months to October, compared with 5.6% in September.

The retail prices index includes mortgage interest payments.

Good harvests helped to keep food prices down and the cost of air travel and petrol also fell due to a fall in the price of crude oil.

This helped to offset an increase in energy prices, although a rise in domestic fuel costs is expected to contribute to an increase in inflation in November.

Npower’s price increase came into effect in October, following the lead of British Gas, SSE, Scottish Power and E.ON, while EDF plans to increase its prices this month.

Despite October’s fall, inflation is still significantly above the Bank of England’s 2% annual target and the Bank’s governor, Mervyn King is due to write to Chancellor of the Exchequer, George Osborne, to explain why the target has been exceeded.

The Bank expects inflation to fall in 2012 as prices decline and the effect of the VAT increase from 17.5 per cent to 20 per cent in January is no longer felt.

In its quarterly inflation report, the Bank is expected to comment on the likelihood of the UK economy falling into a double-dip recession.

It is anticipated that growth forecasts will be cut in the face of the ongoing crisis in the eurozone and weak manufacturing, trade and services figures.

Official figures from the Office for National Statistics show a 0.2 per cent in UK manufacturing output in September, the first increase in four months.

Compared with a year ago, factory output in September grew 2 per cent.

However the figure excludes oil and gas, and mining, and when these sectors are taken into account, industrial output remained unchanged.

The British Chambers of Commerce (BCC) said the figures were reassuring considering the current difficulties in the eurozone and the UK’s ongoing austerity measures.

There is growing pressure for the government to moderate the austerity measures in order to help the UK economy grown.

In contrast to the BCC’s optimism, Chris Williamson, the chief economist at Markit, said that the rate of manufacturing growth was disappointing’.

The Markit/CIPS Manufacturing Purchasing Managers’ Index (PMI) showed a contraction in UK manufacturing in October, with a fall from 50.0 in September to 47.4, its lowest level since June 2009.

A reading of above 50 on the index indicates growth.

A fall in new orders contributed to the decline, with companies reducing their backlog in order to maintain activity.

The ongoing eurozone debt crisis was a major contributory factor to the weak demand and in the House of Commons yesterday David Cameron revealed that he is pushing Germany to take action over the crisis.

Mr Cameron wants Germany’s Bundesbank to lift its opposition to the European Central Bank’s (ECB’s) plan to bail out the euro.

The ECB wishes to use eurozone countries’ reserves to boost the European Financial Stability Facility (EFSF) to €1 trillion.

The EFSF was established to safeguard financial stability in Europe by providing financial assistance to euro area Member States.

Germany considers the plan to boost the €440bn euro-fund to €1 trillion a threat to the independence of the Bundesbank.

The Office for National Statistics (ONS) has today revealed the UK economy expanded by a better-than-expected 0.5% in the July to September period.

This compares with a 0.1% growth rate for the second quarter and was better than the 0.3% expected by most economists.

The better performance was attributed to production sector output, which rose 0.5% in the three month period, versus a 1.2% decline in the previous quarter.

Meanwhile, business services and finance were the biggest contributor to overall growth in the period, expanding by 0.8%, the Office for National Statistics said.

However, the better than expected figures should not be regarded as an economic rebound since it compares with a second quarter which was hit by “special factors” such as the Royal Wedding and Japanese tsunami which trimmed as much as 0.5 percentage points from quarterly growth, analysts’ said.

Analysts also point out that the third quarter growth was still weak, at just 0.5%, and the outlook remains bleak.

Meanwhile, Chancellor of the Exchequer George Osborne described the figures as “a positive step” but added that the British economy still has a “difficult journey”.

In other news today, the Markit Purchasing Managers’ Index (PMI) revealed manufacturing activity contracted in October with the index falling to 47.4 in October from a reading of 50.8 the previous month.

The index is at the lowest level since June 2009 and suggests a weak start to the final quarter of 2011.

As a result, the latest PMI figures suggest the economy is still struggling and the Chancellor admitted that the euro zone debt crisis remains a concern.

Chris Williamson, chief economist at Markit, said there is a “significant risk” of the economy contracting in the fourth quarter and this follows similar observations made last week by Martin Weale and Paul Fisher, who are both members of the Bank of England’s Monetary Policy Committee.

According to a report by the Office for National Statistics (ONS), the number of people paying into an occupational pension has slumped to a level not seen since 1956.

Last year, there were 8.3 million people contributing to an occupational pension (3 million in the private sector and 5.3 million in the public sector).

This represented the lowest figure for 54 years when 8 million contributed to this type of scheme – down from a record high of just over 12 million in 1967.

According to the National Association of Pension Funds (NAPF), in the last decade, thousands of private sector final salary schemes have closed to new members, with less than one in five final salary schemes now open to both new and existing members.

Commenting on the report, Joanne Segars, NAPF Chief Executive, said: “It’s astonishing that pension uptake has slumped to such a low level, and with a greying population living longer and longer, it’s the last thing our society needs.

“Unemployment is partly to blame, but many who have a job are struggling with household finances and the rising cost of living. People are thinking about today and putting tomorrow on hold, and unfortunately saving into a pension is being seen as a luxury,” she added.

She explains that many are being put off by the turmoil in the stock markets, as well as falling confidence in the pensions industry’s fees and charges.

However, Ms Segars warns that those who opt to stop paying into their pensions could be in for cash problems for later in life.

The Association is urging the Government do all it can with regard to new pension reforms by explaining the benefits of a pension and at the same time boosting confidence within the system.

The Office for National Statistics (ONS) has today revealed UK public sector net borrowing fell last month.

According to the ONS, public sector net borrowing came in at a lower than expected £14.1 billion in September, boosted by tax receipts.

Analysts had expected borrowing to total £14.5 billion.

Furthermore, the ONS revised down the borrowing figure for August by £2 billion to £13.7 billion.

The Government’s independent Office for Budget Responsibility (OBR) is expecting public sector net borrowing to come in at £122 billion for the current tax year – lower than the £143 billion borrowed in the previous tax year.

The latest figures means the Government is on track to meet its deficit target.

So far this year, the Government has borrowed £63.5 billion – down £7.5 billion on the same period a year earlier.

Overall, public sector net debt stands at 62.6% of UK GDP (total economic output) – up from 55.3% this time last year.

However, analysts have cautioned that the debt crisis in the euro zone, together with the Government spending cuts and rising unemployment, may hit the economy and make it harder to sustain borrowing reductions.

In other news this week, the ONS revealed Consumer Price Inflation (CPI) accelerated to annual rate of 5.2% last month from August’s rate of 4.5%.

The rate represented the highest since September 2008 and it has never exceeded this rate since the CPI measure was first calculated in 1997.

Furthermore, last week, the ONS revealed UK unemployment rose sharply in the three months to August – rising to a 17-year high.

The ONS said unemployment rose by 114,000 in the three month period to 2.57 million, taking the unemployment rate to 8.1% – higher than forecasts.

Rising inflation and unemployment are putting further pressure on households’ budgets and this is likely to impact on spending, which could weaken economic growth further.

The sluggish economy and rising unemployment could hit taxation revenues and lower the Government’s chances of hitting its target, according to analysts.

The Office for National Statistics (ONS) has today revealed UK retail sales beat forecasts in September, led by spending on electrical goods such as laptop computers.

According to the Statistics Office, sales rose by 0.6% last month, reversing the 0.4% fall in August.

Furthermore, the figure was 0.6% higher on an annual basis.

Retail sales have been struggling over recent times as households continue to be squeezed by higher inflation, rising unemployment and sluggish wage growth.

As a result, conditions are expected to remain challenging for retailers in the medium term.

Last week, the ONS revealed UK unemployment rose to a 17-year high in the three months to August, while earlier this week, it revealed that inflation surged to 5.2% in September, from 4.5% in August.

These pressures are making consumers cautious about spending, according to analysts.

In order to stimulate the economy and aid the recovery, the Bank of England last week announced it would embark on a fresh round of quantitative easing (QE).

There have been fears that the UK could enter a double-dip recession after a recent series of bad news from the economy and the ongoing debt crisis in the euro zone and the majority of economists expected the central bank to introduce a further round of QE.

However, while the Bank hopes the QE scheme will revive the sluggish economy, leading think tank, the Ernst & Young Item Club, warned earlier this week that the QE measures are unlikely to boost the recovery.

Its comments came just a week after the British Chambers of Commerce (BCC) said the fresh round of QE may not be enough to prevent the economy from slipping back into recession and “more radical measures” are required.

In other news today, UK consumer confidence rose for the first time in four months in September, according to GfK NOP research company.

The Office for National Statistics (ONS) has today revealed UK public sector net borrowing rose last month.

According to the ONS, public sector net borrowing came in at a higher than expected £15.9 billion in August – a rise of £1.9 billion from a year ago and represented the highest for the month of August since records began in 1993.

Since the start of the financial year in April, public sector net borrowing totals £52 billion – just 7% less than a year earlier.

Overall, public sector net debt stands at 61.4% of UK GDP (total economic output) – up from 55.3% this time last year.

The Government’s independent Office for Budget Responsibility (OBR) is expecting public sector net borrowing to come in at £122 billion for the current tax year – lower than the £143 billion borrowed in the previous tax year.

However, today’s figures will put further pressure on Chancellor George Osborne’s tough austerity measures but the Treasury maintains that spending plans are on track.

A spokesperson for the Treasury said: “These are challenging times, but despite economic growth being lower than the OBR’s forecast earlier this year, tax receipts have continued to grow and spending so far this year has grown at the rate the OBR forecast in the Budget.

“These figures also include a welcome and substantial downward revision to borrowing so far this year and to overall borrowing last year.”

The OBR estimates that the UK economy will grow by an optimistic 1.7% this year – however, this estimate was made in March and is widely considered out of date.

Yesterday, the International Monetary Fund (IMF) said the global economy has entered a “dangerous new phase” and slashed its growth forecast for the UK.

In its World Economic Outlook bi-annual report, the IMF said the UK economy will grow by 1.1% in 2011 compared with its last forecast of 1.7% in April.

The Office for National Statistics (ONS) has today revealed UK retail sales fell by 0.2% in August after riots earlier in the month affected trade.

The fall followed slower growth in the previous two months after sales rose just 0.2% in July and 0.8% in June.

In the meantime, food sales were also down – an area which has not particularly suffered as consumers rein in their spending.

However, it appears consumers are being cautious after food sales noted a 0.3% fall in August compared with growth of 0.7% in July.

Households continue to be squeezed by higher inflation, rising unemployment and sluggish wage growth.

The ONS revealed earlier this week that inflation rose further in August, to 4.5% on an annual basis.

Consumer spending is a key driver of economic growth and as a result of today’s figures, a further slowdown is anticipated for the third quarter.

Several retailers have recently reported tough trading conditions. Today, Kesa, the parent company of electrical retailer Comet, revealed a sharp fall in sales.

Total revenue in the previous three months fell by 9.8% on a like-for-like basis while sales slumped almost 22% after Kesa blamed weak trading.

However, the company said the fall was expected and compares with strong sales in 2010 due to the football World Cup and the popular launch of Apple’s iPad.

Yesterday, the John Lewis Partnership, which is regarded as a barometer of British retailing, has reported a marginal increase in sales and said trading conditions are “extremely challenging”.

The renowned employee-owned chain, which owns the Waitrose supermarket chain, said sales rose 1% on a like-for-like basis in the six month period to 30 July.

However, across the group, first-half pre-tax profits slumped by 18% to £90.4 million.

In addition, last week, Home Retail Group announced a drop in sales at both its Argos and Homebase chains, while electrical goods chain Dixons Retail posted a fall in sales.

Accountancy firm BDO recently warned Britain’s retailers should prepare themselves for some tough times as pressure builds on consumers in the run-up to Christmas.

However, there was some good news today after Kingfisher, the owner of DIY chain B&Q, announced plans to create more than 1,200 new jobs through a major expansion of its trade supply arm, Screwfix.

The Office for National Statistics (ONS) has today revealed UK unemployment rose sharply in the three months to July – the biggest rise in almost two years.

The ONS said unemployment rose by 80,000 in the three month period to 2.51 million – far higher than the 70,000 expected by economists.

The latest figures take the unemployment rate to 7.9% – however, this was in line with forecasts.

In comparison, unemployment in the US stands at 9.1%, Japan’s unemployment rate is 4.7%, while in the euro zone, it is 10%.

Youth unemployment also grew sharply, by 78,000 to 973,000.

Meanwhile, the number of Britons claiming jobseeker’s allowance (JSA) rose for the fourth consecutive month in August, by 20,300, to 1.58 million – however, this was slightly less than forecasts.

Average earnings, meanwhile, rose by 2.8% between May and July, up by 0.1% over the previous month, with weekly wages now averaging £464.

The number of people in employment in the economy fell by 69,000 in the three month period to 29.17 million – the biggest drop since March 2010, according to the ONS.

Furthermore, the public sector workforce fell by 111,000 in the three months to June – the largest fall since records began.

However, an increase in private sector employment of 41,000 partially offset the drop.

Employment Minister Chris Grayling described them an “unwelcome set of figures”.

The figures suggest the labour market is coming under immense pressure from public spending cuts.

The spending cuts have been described as the biggest for decades; however, Chancellor George Osborne has deemed them necessary in order to bring the budget deficit down.

Some experts have even suggested they could push the economy back into recession.

The Office for National Statistics (ONS) today announced Consumer Price Inflation (CPI) rose to annual rate of 4.5% last month from July’s rate of 4.4%.

However, the figure was in line with analysts’ expectations.

Higher inflation continues to be led by rising food costs but the main reason behind last month’s rise was a 5.1% annual increase in the housing, water, electricity and gas component – which rose the most in more than two years.

Utility companies recently hiked their prices – some by almost 20%.

However, clothing and footwear was also a contributor to higher inflation last month.

UK inflation continues to remain more than double the target of 2% and has been above this level since December 2009 and is expected to remain above target during 2012.

The Bank of England has previously warned that inflation could reach 5% later this year, driven higher by rising energy and food costs but should return to target by 2013.

Meanwhile, Retail Price Inflation (RPI), which includes mortgage costs and is used as the basis for many wage deals, rose to 5.2% in August from 5% in July.

Inflationary pressures are rife throughout the world, particularly in Asia, and many central banks have opted to lift interest rates to combat stubbornly high inflation.

However, the Bank of England last week opted to keep rates at the historic low of 0.5%, suggesting it is reluctant at this stage to lift interest rates as it could be harmful to the economic recovery.

Last month, policymakers Martin Weale and Spencer Dale dropped their call for higher interest rates and joined their fellow Committee members by opting to keep rates low to stimulate the recovery.

The economy appears to be stuttering at present and many experts believe the central bank may re-introduce the quantitative easing (QE) programme – designed to stimulate growth within the economy.

In other news today, the ONS reported that the UK goods trade deficit unexpectedly widened in July.