UK inflation falls to 2% target

Consumer prices rose by 2.0% in the 12 months to May, down from 2.3% in April, according to the latest data.

It means that inflation has reached the Bank of England’s target for the first time in nearly three years.

Prices are still rising, but at the slowest pace since July 2021. The consumer prices index (CPI) peaked at 11.1% in October 2022, the highest level since 1981.

The biggest downward contribution to May’s inflation figure came from falling food prices, while upward pressure came from a slight rise in the cost of petrol and diesel, the Office for National Statistics (ONS) said.

Core inflation, which excludes volatile elements such as energy and food, fell to 3.5% in May from 3.9% in April.

However, services inflation remained high, dipping slightly to 5.7% in May from 5.9% in April.

Analysts believe there could be a further delay to the anticipated cut in interest rates from the Bank of England, with expectations now moving towards a reduction in September rather than August.

Shop price rises back to ‘normal levels’

Inflation in UK shops is now at “normal levels” and prices for some items have fallen, according to the latest retail industry data.

The British Retail Consortium (BRC) and research firm NielsenIQ found that shop prices rose at an annual rate of 0.6% in May, down from 0.8% in April. The rate is at its lowest since November 2021.

Food inflation fell for the 13th consecutive month to 3.2%, from 3.4% in April. Price rises remained higher for ambient food than for fresh food, especially for sweet products which continued to reflect the effects of high global sugar prices.

Meanwhile, prices of non-food items have been falling, with deflation standing at -0.8% in May after -0.6% in the prior month.

Retailers cut furniture prices in an effort to revive subdued consumer demand, and there have been promotions on TVs and other audio-visual equipment ahead of the Euro 2024 football tournament.

BRC chief executive Helen Dickinson said that “future government policy” must support retailers to keep inflation down.

“With an election in a matter of weeks, it is vital that parties detail their support for customers and retailers in their upcoming manifestos,” she added.

Mike Watkins, head of Retailer and Business Insight at NielsenIQ, said: “After a number of months of falling input prices, we are now seeing food inflation stabilise and retailers continue to pass on price cuts to shoppers.

“Across the industry whilst inflationary pressure has eased and there is some improvement in shopper sentiment, the unseasonable weather has dampened retail sales so lower prices look set to continue and promotional activity is likely to increase drive demand.”

Official figures released last week showed that the overall rate of inflation eased to 2.3% in April — the lowest level in almost three years.

Inflation rate falls to 2.3%

UK inflation is continuing to come down, dropping to the lowest level in almost three years.

Prices rose at 2.3% in the 12 months to April, down from 3.2% in March, according to the latest monthly report from the Office for National Statistics (ONS).

Although this is well below the recent peak of 11.1% seen in October 2022, the rate is still higher than the Bank of England’s target of 2%. It is also slightly higher than the 2.1% predicted by economists.

Lower gas and electricity prices were the main driver behind the inflation drop in April, after a reduction in the energy price cap set by Ofgem. Energy prices fell by 27.1% in the year to April, the largest fall on record.

Food inflation also continued to ease, with prices of food and non-alcoholic beverages rising by 2.9% in the year to April, down from 4.0% in the year to March. This was the 13th consecutive month of falling food inflation, from the high of 19.2% in March 2023, the highest annual rate for over 45 years.

The Bank of England said earlier in May that it wanted to see “more evidence” that inflation will stay low before deciding to cut interest rates.

Analysts currently expect rates to be held at 5.25% at the next meeting of the Monetary Policy Committee in June, followed by a cut in August.

UK inflation eases to 3.2%

Price rises are continuing to slow down and UK inflation is now at its lowest level for two and a half years.

The consumer prices index (CPI) measure of inflation eased to 3.2% in the 12 months to March 2024, from 3.4% in February, the Office for National Statistics (ONS) said.

Inflation has been falling gradually since hitting a peak of 11.1% in October 2022.

The largest downward contribution to the change in CPI in March came from food, with prices rising by less than a year ago. The largest upward contribution came from petrol and diesel costs, which rose this year but fell a year ago.

Prices for food and non-alcoholic beverages rose by 4% in the year to March 2024 and there were decreases in price for some food items, including chocolate biscuits, crumpets and meat.

Food inflation is down from 19.2% in March 2023, the highest annual rate seen for over 45 years.

Responding to the data, the Joseph Rowntree Foundation said that food prices have increased by 30% compared to April 2021, when prices started to accelerate.

The organisation called on the UK government to build an ‘Essentials Guarantee’ into Universal Credit to ensure that people always have enough to afford the essentials.

UK inflation eases to 3.4%

Slower prices rises for food contributed to a further easing of UK inflation in February, according to new data.

The consumer prices index (CPI) measure of inflation fell to 3.4%, the lowest level for nearly two and a half years and down from 4.0% in January.

Prices for food and non-alcoholic beverages rose by 5.0% in the year to February, compared with 7.0% in January, the Office for National Statistics (ONS) said. This continues an 11-month downward trend from the peak of 19.2% in March 2023, the highest annual rate seen for over 45 years.

Prices also eased for restaurants and hotels, as well as alcohol and tobacco, and clothing and footwear.

“These falls were only partially offset by price rises at the pump and a further increase in rental costs,” said ONS chief economist Grant Fitzner.

The monthly report comes ahead of the Bank of England’s latest interest rate decision on Thursday. Analysts expect the base rate to be held at 5.25%, with a potential reduction later in the year.

Vinyl records return to ONS basket of goods

Vinyl records and air fryers are among the additions to the latest “shopping basket” used by statisticians to track prices and work out the rate of inflation.

It’s the first time in more than 30 years that the virtual basket of goods and services has included vinyl records. They were removed in 1992 after being overtaken by CDs and cassettes, but have seen a resurgence in recent years.

Meanwhile, as energy bills increased air fryers soared in popularity as an energy-saving and healthy way of cooking meals at home.

The ONS reviews the basket once a year. This year, 16 items have been added and 15 have been removed out of a total of 744 items.

Other new additions include gluten free bread, reflecting the expanding shelf space and range of gluten free products, as well as edible sunflower seeds, rice cakes and spray oils.

Hand hygiene gel was added to the basket in 2021 at the height of the Covid-19 pandemic, but demand has fallen so it has now been removed from the basket.

Hot rotisserie cooked chicken has been dropped as some supermarkets have stopped selling this item.

Sofa beds were also removed, with pull-out beds becoming more popular, and the ONS removed bakeware such as roasting tins because the price movements follow a similar trend to prices of frying pans, which remain in the basket.

It also decided to merge take-away tea and take-away coffee into a single item: take-away hot drinks.

ONS deputy director for prices, Matt Corder, said the inflation basket of goods offers a “fascinating snapshot” of consumer spending over the years.

“Often the basket reflects the adoption of new technology, but the return of vinyl records shows how cultural revivals can affect our spending,” he added.

Inflation unchanged at 4% in January

The UK’s annual rate of inflation showed no change from December to January, despite food prices falling for the first time since September 2021.

The consumer prices index (CPI) measure of inflation stood at 4% in the 12 months to January 2024, the same rate as in December 2023, the Office for National Statistics (ONS) said.

Higher gas and electricity charges contributed upward pressure following an increase in the energy price cap. The cost of second-hand cars also went up for the first time since May.

“Offsetting these, prices of furniture and household goods decreased by more than a year ago and food prices fell on the month for the first time in over two years,” said Grant Fitzner, chief economist at the ONS.

Food prices declined by 0.4% from December to January, and the annual rate of food inflation eased to 7% — the lowest since April 2022 — from 8% in December.

The fall to 7% means that food inflation has eased for the 10th consecutive month, from a recent high of 19.2% in March 2023, which was the highest annual rate seen for over 45 years.

January’s overall inflation figure is better than expected: the Bank of England had forecast 4.1%. However, it remains well above the central bank’s target rate of 2%.

In response to the data, Chancellor Jeremy Hunt said: “Inflation never falls in a perfect straight line, but the plan is working; we have made huge progress in bringing inflation down from 11%, and the Bank of England forecast that it will fall to around 2% in a matter of months.”

Surprise increase in inflation for December

UK inflation rose again in December 2023, according to the latest data from the Office for National Statistics (ONS).

The consumer prices index (CPI) measure of inflation stood at 4% in the 12 months to December, up from 3.9% in the year to November. Economists had forecast a slight fall.

Higher prices for tobacco and alcohol were behind the surprise uptick, as well as increased costs for transport and recreational goods and services such as DVDs, games consoles, sports equipment, live music and theatre tickets.

Food prices are still rising, but at a much lower rate than this time last year. The largest downward contribution to the monthly CPI figure came from food and non-alcoholic beverages.

Other countries including France, Germany and the United States had also seen a “slight uptick in annual inflation in December”, ONS chief economist Grant Fitzner told the BBC’s Today programme.

Despite the rise, the Bank of England is still expected to cut interest rates this year.

The base rate currently stands at 5.25%, a 15-year high, following 14 consecutive hikes aimed at bringing inflation down.

A fall in energy prices is expected to help drive down overall inflation and economists anticipate a rate reduction around May or June.

Bigger than expected drop in inflation

UK inflation is continuing to slow down, with prices rising by 3.9% in the 12 months to November, down from 4.6% in October.

The decrease was steeper than had been forecast by analysts, taking inflation to its lowest level since September 2021.

Smaller price rises for food, fuel, household goods and recreation activities, together with a decrease in prices for raw materials, were behind the monthly figure, the Office for National Statistics (ONS) explained.

The cost of raw materials for manufacturing decreased for the sixth consecutive month as prices fell by 2.6%, unchanged from a drop of 2.6% in October.

“Inflation eased again to its lowest annual rate for over two years, but prices remain substantially above what they were before the invasion of Ukraine,” said Grant Fitzner, chief economist at the ONS.

Food prices were up 9.2% in the year to November, easing for the eighth consecutive month from a high of 19.2% in March 2023 — the highest annual rate seen for over 45 years. Last month’s rate of food inflation was the lowest since May 2022 thanks to slowing price rises for bread and cereals as well as meat, milk, cheese and eggs, and soft drinks.

Overall inflation is still just under double the Bank of England’s 2% target and the central bank has said it is too early to consider cutting interest rates from the current level of 5.25%, a 15-year high.

UK inflation falls to two-year low of 4.6%

Lower energy prices are one factor behind a significant fall in UK inflation, according to the latest monthly data.

The consumer prices index (CPI) measure of inflation dropped to 4.6% in the year to October 2023, from 6.7% the previous month, the Office for National Statistics (ONS) said. It’s the lowest rate of inflation since October 2021.

“Inflation fell substantially on the month as last year’s steep rise in energy costs has been followed by a small reduction in the energy price cap this year,” explained ONS chief economist Grant Fitzner.

“Food prices were little changed on the month, after rising this time last year, while hotel prices fell, both helping to push inflation to its lowest rate for two years.”

Although food inflation remains high, October saw the annual rate ease to the lowest level since June last year at 10.1%.

However, James Smith, research director at think tank the Resolution Foundation warned that the cost-of-living crisis is not yet over and persistently high inflation has left consumers facing much higher prices.

“Over the past two years, the cost of energy has surged by 49% while food prices have risen by 28% — far greater than the 14% in average earnings over this period,” he said.

Despite October’s decrease, inflation is still well above the Bank of England’s 2% target and interest rates — currently at 5.25%, a 15-year high — are unlikely to be cut in the near future.