In November, the UK saw a further easing of inflation, bringing some relief to consumers and retailers as they prepare for the upcoming Christmas season. The latest data from the Office for National Statistics revealed that the Consumer Prices Index (CPI) inflation dropped to 3.9% in November, down from 4.6% in October. This marks the lowest rate since September 2021 when it had at times approached double digits.
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) also experienced a decrease, rising by 4.2% in the 12 months leading up to November 2023, compared to 4.7% in October. However, Core CPIH, which excludes energy, food, alcohol, and tobacco, remained relatively high at 5.2%, although it did decrease from 5.6% in October. It is important to note that despite the slowdown, inflation still remains above the Bank of England’s target rate of 2%.
The Office for National Statistics highlighted that the largest contributors to the decline in both CPIH and CPI on an annual basis were the transport, recreation and culture, and food and non-alcoholic beverages sectors. Looking specifically at clothing and footwear, the CPIH inflation rate slightly eased from 6.2% in October to 5.7% in November. While this is still a significant figure, it is higher than the average for the month.
Although fashion prices may not be decreasing as rapidly as in other sectors, the reduction in prices seen in other areas could potentially encourage consumers to spend more on fashion. Helen Dickinson, CEO of the British Retail Consortium, noted the continued easing of clothing and footwear inflation as well as the eighth consecutive decline in food inflation. Dickinson also highlighted potential risks that could impact inflation in 2024, including higher business rates, new EU border checks, and an increase to the National Living Wage. She emphasized the importance of the government considering the cumulative impact of its policies to prevent a resurgence in inflation.
The easing of inflation suggests that interest rate cuts may occur sooner than previously expected, despite recent indications from the Bank of England that rates may stay “higher for longer.” However, with inflation still above the target rate and potential risks looming, policymakers must closely monitor the situation and take necessary measures to ensure stable economic growth.
Useful Links:
– Office for National Statistics – Consumer Price Inflation
– Bank of England – Inflation Report
