Lower prices for clothing and food drive down UK inflation

The UK’s inflation rate fell to 0.3% in November from 0.7% in October, according to the latest monthly report from the Office for National Statistics (ONS).

Lower prices for clothing, food and non-alcoholic drinks made the biggest contribution to the fall.

These were partially offset by higher prices for games, toys and other recreational activities as people looked for ways to entertain themselves at home during the second Covid-19 lockdown.

In its report, the ONS noted that clothing and footwear prices have followed a different pattern in 2020 compared with previous years. There was increased discounting during March and April, probably in response to the first lockdown. Prices then remained relatively stable to August. Between August and October, prices broadly increased as usual, but this has been followed by a fall between October and November, whereas prices normally rise between these two months when the autumn ranges come in.

Ruth Gregory, senior UK economist at Capital Economics, quoted by the Daily Telegraph, said that the sharp fall in inflation “came as a bit of a surprise”. She added:

“Some of these moves were driven by temporary factors so we still expect inflation to rise temporarily back towards the 2% target next year. Beyond that, though, the slack in the economy should keep underlying price pressures subdued and allow inflation to drop back to 1.5% in 2022. That is unless a no-deal Brexit pushes it up to a peak of 3-4%.”