UK inflation dips as food and energy costs remain high
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Official data said the inflation rate fell by more than expected to 10.7 percent in November from 11.1 percent the previous month – the biggest drop for 16 months. Prices are still rising, but at a slower rate than October when rising energy bills sent inflation to its highest level since 1981.
The slowdown is good news for households and some experts believe inflation has peaked and will continue to fall next year.
The Office for National Statistics (ONS) said a drop in the price of fuel was part of the reason for the fall, but that was off-set by increases for alcohol in restaurants, cafes and pubs.
Economists had expected Consumer Prices Index (CPI) inflation to fall to 10.9 percent.
But despite the welcome news, food inflation is still surging.
It hit a 45-year high of 16.4 percent last month, while power costs remain painfully high, despite Government support limiting the annual average bill to around £2,500 since October.
Chancellor Jeremy Hunt said inflation was “the number one enemy”. He added: “Getting inflation down so people’s wages go further is my top priority.
“Which is why we are holding down energy bills this winter through our energy price guarantee scheme and implementing a plan to help halve inflation next year.
“I know it is tough for many right now, but it is vital we take the tough decisions needed to tackle inflation – the number one enemy that makes everyone poorer.”
November’s easing inflation is unlikely to alter the Bank of England’s thinking today, with economists predicting it will look to hike interest rates once again.
The Bank is expected to increase rates from 3 percent to 3.5 percent to help rein in inflation, though some believe the pace of the rises will slow after this month.
Samuel Tombs at analysts Pantheon Macroeconomics said last month’s data “suggests the peak rate lies firmly in the past”.
He believes CPI will drop to around eight percent next April and three percent by the end of next year.
Julian Jessop, economics fellow at the free-market Institute of Economic Affairs, said: “The dip in the headline rate of UK inflation is obviously welcome. But there is still a long way to go even to get close to the Bank of England’s two percent target.
“Food price inflation is also still rising, which is a particular worry for low-income households.”
He added that he expects inflation to “fall sharply” in 2023.
Consumer markets expert Lisa Hooker at PwC said the slowdown “will be of little consolation to households contending with record cost-of-living increases in so many areas of essential spending”.
She added: “They can only hope that the new year brings respite after three years of disruption from pandemic lockdowns, virus variants and cost-of-living woes, although forecasts of a continued real decline in wages are already putting a cloud on 2023.”
The ONS data showed falling prices at the fuel pumps were among the biggest driver of easing inflation.
Petrol was unchanged between October and November this year, at 163.6p a litre on average, but rising by 7.2p a litre on a year earlier. Diesel price increases also eased, rising by 4p a litre this year to 187.9p, compared with a larger rise of 7.4p a litre a year ago.
Second-hand car prices likewise helped CPI fall back, with a 5.8 percent drop in the year to November compared with a 2.7 percent fall in the year to October. The latest figures also showed declines in the rates of the other measures of inflation recorded by the ONS.
The Retail Price Index fell to 14 percent from 14.2 percent in October, while CPI – including housing costs – dropped to 9.3 per cent from 9.6 percent last month.
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