UK inflation falls from 41-year high
INFLATION in the UK dipped from a 41-year high in November, indicating the possibility that the worst of the country’s cost-of-living crisis is over.
The Office for National Statistics (ONS) said on Wednesday (Dec 14) that consumer prices rose 10.7 per cent from a year earlier. The figure was down from October’s 11.1 per cent. Economists expected a rate of 10.9 per cent.
The decline was largely due to the cost of petrol and used cars. The prices of food and non-alcoholic beverages rose 16.4 per cent, the most since September 1977, with bread and cereals gaining the most in that category.
Fuel prices were unchanged between October and November, compared with a 7.2 per cent rise in the same months in 2021. This helped bring down the annual rate of inflation in the latest month.
The slowdown will be welcomed by households desperate for relief after a surge in energy and food bills. However, it will do little to shift the interest-rate debate at the Bank of England, where officials expected inflation to remain above the target of 2 per cent until 2024, despite an economic recession.
Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said: “While these figures suggest inflation has peaked, it nevertheless remains at a precariously high rate, which is having a real impact on people and businesses. With inflationary pressures looking more broad-based, the pace of easing is likely to be slow.”
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Core inflation, which excludes energy, food, alcohol and tobacco prices, eased to a growth of 6.3 per cent, from 6.5 per cent in October.
Meanwhile, alcohol prices – particularly for whiskey, wine and gin – in restaurants, cafes and pubs rose sharply.
ONS chief economist Grant Fitzner said that tobacco and clothing prices also rose, but by less than what was seen in the year-ago period. He added that the increase was “partially offset by prices in restaurants, cafes and pubs, which went up this year compared to falling a year ago”.
On Thursday, policymakers are expected to deliver their ninth rate increase on borrowing costs this year. The move is an effort to stop a wage-price spiral from taking hold; further hikes in the first half of 2023 have also been signalled.
Chancellor of the Exchequer Jeremy Hunt said: “I know families and businesses are struggling here in the UK. Getting inflation down so people’s wages go further is my top priority.”
In the US, evidence that inflation has peaked is mounting as well, stoking hopes that the Federal Reserve will soon pause its rate-hiking cycle. US consumer prices rose 7.1 per cent in November, after declines in the past five months.
In contrast, inflation in the UK has risen faster than expected over the past 1.5 years, fuelling demands from workers for higher pay. Strikes by unions representing train drivers, nurses and border agents are putting pressure on Prime Minister Rishi Sunak’s government to ease wage restraints.
Unlike the US, where petrol prices have tumbled and power markets are largely insulated from overseas trends, UK energy prices have spiralled ever-higher this year, after Russia choked off supplies of natural gas to Europe.
Producer input and output prices are normally released alongside the consumer price index data. However, the ONS decided not to publish them this month following the discovery of problems that are now under investigation. BLOOMBERG
Share with us your feedback on BT's products and services
