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In November, the United Kingdom experienced a notable reduction in inflation, reaching its lowest level in eight months. This decline was largely driven by decreases in the prices of food, alcohol, and clothing. According to the Office for National Statistics (ONS), the inflation rate fell from 3.6% to 3.2%, a more significant drop than economists had forecasted. Grant Fitzner, chief economist at the ONS, attributed much of the decline to lower food costs, with notable reductions in items such as cakes, biscuits, and breakfast cereals.
This easing in inflation is expected to influence the Bank of England’s upcoming interest rate decision, with many anticipating a rate cut on Thursday. The fall in inflation raises hopes that the peak has passed, potentially setting the stage for additional reductions in borrowing costs next year. Alongside food, other categories contributing to the decline include tobacco, restaurant meals, hotel stays, furniture, and transport. Despite the overall trend of rising prices across the economy, some goods and services saw monthly price decreases between October and November. Food prices, in particular, fell by 0.2 percentage points month-on-month, contrasting with the usual seasonal increases. Over the 12 months to November, food inflation dropped to 4.2% from 4.9%.
Chancellor Rachel Reeves welcomed the news, acknowledging the positive impact on households. She emphasized her commitment to alleviating financial pressures by citing measures such as the freezing of rail fares and prescription fees, and a £150 reduction in average energy bills announced in this year’s Budget. The UK’s inflation measurement is based on the Consumer Prices Index, which includes a range of everyday items like bread, fruit, and clothing. Interestingly, the inflation figures prompted a 0.7% depreciation of the British pound against the US dollar.
While the slowdown in food inflation is encouraging, prices for some popular Christmas items have fluctuated. Beef, chocolate, milk, and coffee have all seen significant year-on-year price rises, with beef up by 27.7% and chocolate by 17.3%. Conversely, the cost of olive oil, flours, and pasta declined. Other traditional festive foods, including cheese, potatoes, and poultry, experienced minimal price changes. Economists highlighted that seasonal factors like heavier Black Friday discounts also played a role in dampening inflation, especially in clothing and footwear sectors. Sarah Coles from Hargreaves Lansdown noted that sluggish sales led retailers to offer deeper discounts on items such as women’s clothing and shoes.
Paul Dales, chief UK economist at Capital Economics, described the fall in inflation as “particularly good news,” emphasizing that price reductions in discretionary goods add a positive dimension to the overall picture. Danni Hewson of AJ Bell welcomed the news as timely for families at the supermarket during the festive season, although she cautioned that lower inflation rates do not equate to a lower cost of living. Hewson pointed out that many households are still grappling with the financial consequences of previous substantial price surges over recent years
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