UK inflation slows more than expected to 3.9% amid drop in price of petrol, bread and cakes – business live

The UK chancellor, Jeremy Hunt, said there was “still further to go” on tackling inflation, after the surprisingly large fall to 3.9% in November.

He told reporters:

There’s still further to go. Inflation never falls in a straight line.

In a statement, he explained:

With inflation more than halved we are starting to remove inflationary pressures from the economy. Alongside the business tax cuts announced in the autumn statement this means we are back on the path to healthy, sustainable growth.

But many families are still struggling with high prices so we will continue to prioritise measures that help with cost of living pressures.

Let them eat cake! Prices of a number of bread products, including white and wholemeal sliced loaves, and packs of cakes all fell between October and November, but rose a year ago.

Other smaller downward contributions to the change in the inflation rate came from meat; milk, cheese and eggs; and soft drinks. The only partially offsetting upward effect came from fruit, where prices of strawberries rose this year by more than a year ago.

Back to the breakdown.

Second-hand car prices fell by 2.1% between October and November, a bigger fall than last year, while prices of roadside recovery services were also down, but rose a year ago.

Air fares fell as usual between October and November. This year, they fell by 13.9%, compared with 10.1% a year ago.

Also down were prices of games, toys and hobbies, particularly computer games, and cultural services, especially theatre and live music event tickets.

In even better news, food and non-alcoholic drink prices rose by 0.3% between October and November, compared with a rise of 1.1% a year ago. The annual rate eased for an eighth moth to 9.2%, the lowest since May 2022. It compares with a recent high of 19.2% in March, which was the highest annual rate for more than 45 years.

The slowdown in inflation was caused by a drop in petrol prices, while second-hand cars, maintenance and repairs, and air fares also dragged the figure down.

The average price of petrol fell by 4.1 pence per litre between October and November to 151p per litre, down from 163.6p per litre in November 2022. Diesel prices fell by 3.2p per litre this year to 159p, down from 187.9p per litre in November 2022.

Overall, motor fuel prices fell by 10.6% in the year to November, compared with a fall of 7.6% in the year to October.

Inflation in the UK slowed more than expected last month.

The annual inflation rate, measured by the consumer prices index, fell to 3.9% from 4.6% in October, the lowest since 2021, the Office for National Statistics said. Analysts had expected a reading of 4.4%.

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The latest inflation data will shed some light on whether Britain’s cost of living crisis is easing.

UK inflation is expected to have slowed to an annual rate of 4.4% in November, from 4.6% in October, according to analysts’ forecasts. The Office for National Statistics will release the figures at 7am GMT.

Core inflation, which strips out volatile items like food and energy, is forecast to have dipped to 5.6% from 5.7%.

In October, consumer price inflation fell sharply from 6.7% to 4.6%, reflecting a monthly fall in gas and electricity costs this year whereas last year there was a steep rise, but prices for food, other goods, and services all eased back too.

Sandra Horsfield, UK economist at Investec, explained:

That said, declaring victory over inflation remains a more remote prospect in the UK than in the US or indeed the eurozone, both of which are visibly closer to target inflation, with lower ‘core’ inflation too. The pain this entails for households is clear, which the Bank of England is all too aware of. This month, we expect to see further evidence that inflation is heading back down again. But that progress is likely to be fairly gradual.

Food and energy price inflation is likely to have contributed again – the latter this time because of falling petrol prices, not due to changes in utility bills, which are adjusted only quarterly. We also see scope for inflation for certain goods prices to keep easing: certainly, producer price inflation figures suggests there is plenty of scope for this in the months to come. But it is not uniform; base effects in clothing and footwear prices, for instance, look unfavourable, as there was already a large drop last year.

Still, ‘core’ prices for goods and also services actually reflect some energy costs too, where these are embedded into production costs. It is therefore likely that the significant retracement in wholesale energy costs, even if to historically still fairly high levels, is helping to push core inflation down too.

For the Bank of England, the downtrend trend in inflation is likely to be perceived as too gradual to allow for rate cuts in the very near term, especially considering the jobs market still looks reasonably robust. We continue to expect a first move down in interest rates only in August 2024.

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