UK inflation unexpectedly drops to 3.2% after food prices fall
Inflation in the UK fell much more than expected last month, as food prices fell to ease the cost of living, new official figures show.
The Office for National Statistics (ONS) said consumer price index (CPI) inflation fell to 3.2 per cent in November from 3.6 per cent in October; It is the lowest rate since March this year and a considerably larger decline than the 3.5 percent most economists expected.
The most immediate knock-on effect of this data, which shows that unemployment increased last week and the economy contracted by 0.1 percent, will almost certainly be an interest rate cut when the Monetary Policy Committee voters meet on Thursday.
The unexpected fall in the CPI rate would mean a fourth rate cut of the year ahead of Christmas, although the Bank of England is reluctant to cut interest rates too quickly with inflation well above its 2 per cent target.
Although inflation has slowed, the rate of 3.2 percent still indicates an increase; This means that prices are still rising, but at a slower rate than before.
The biggest factors affecting overall inflation last month were food and beverages, as well as alcohol and tobacco.
While food and non-alcoholic beverage prices decreased by 0.2 percent in November on a monthly basis, the biggest decreases were experienced in bread and cereals, as well as dairy products, sugar, jam and chocolate.
The category’s annual inflation rate fell from 4.9 percent in October to 4.2 percent in November.
Alcohol and tobacco inflation fell sharply from 5.9 percent during the year to October, falling to 4 percent by November; This marks the lowest rate in nearly three years.
Get a free partial share of up to £100.
Capital is at risk.
Terms and conditions apply.
ADVERTISING
Get a free partial share of up to £100.
Capital is at risk.
Terms and conditions apply.
ADVERTISING
The ONS also highlighted more Black Friday sales on clothes and shoes this year, which helped prices fall by 0.3 per cent between October and November.
The biggest declines were in women’s clothing, a variety of items including pants and skirts.
Chancellor Rachel Reeves said reducing household bills was the “number one priority” after the latest inflation data was released.
He said: “I know families in England who are worried about their bills will welcome this reduction in inflation.
“Reducing bills is my top priority. That’s why I’ve frozen rail charges, prescription charges and cut average energy bills from the budget by £150 this year.
“The Bank of England accepts that this will help reduce prices and as a result it expects inflation to fall faster next year.”
ONS chief economist Grant Fitzner said: “Inflation fell markedly in November to its lowest annual rate since March.
“Low food prices, which traditionally rise at this time of year, were the main driver of the decline, with particular declines seen in cakes, biscuits and breakfast cereals.
“Tobacco prices also helped push the rate down, with prices falling slightly this month after a big increase last year. The drop in women’s clothing prices was another downward factor.
“While the increase in the cost of goods leaving factories slowed down due to the impact of low food inflation, the annual cost of raw materials for businesses continued to increase.”
Kris Hamer, director of insights at the British Retail Consortium (BRC), said the drop in inflation was due to “extensive discounting by retailers during Black Friday”.
“Many customers will be relieved to see clothing and footwear prices fall year on year as they begin their Christmas shopping,” he said.
“High labor and commodity costs will push food inflation up in 2025, while bigger promotions ahead of Christmas have helped reduce this figure.
“As a result, agreements were made that saw larger discounts on some meat products such as pork, lamb and chicken.”
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Energy prices also continued to drive low inflation as the energy price cap rose lower in October than the previous year, with average electricity prices rising by just 2.8 per cent and gas prices rising by 2.1 per cent. The budget brought some good news for energy bills with the removal of charges which is expected to reduce the cost by £150 a year from April. Given that the forecast would otherwise be for an increase in the price cap in April “It will be a relief for those who have difficulty paying.”
Karen Betts, CEO of the Food and Drink Federation, added: “It’s good to see food inflation starting to fall, especially as shoppers stock their cupboards for the festive season. “However, food prices remain higher this Christmas than last year, with many consumers being forced to make difficult choices about what to buy this year.
“Manufacturers continue to work hard to cut costs and pass on potential savings to consumers, but they themselves continue to face significant cost pressures. To really impact this persistent food inflation, we need the government to redouble its efforts to reduce costs with food businesses, such as energy, and boost growth and productivity to drive down prices across the food and drink supply chain in the coming weeks and months.”
Additional reporting by PA
