- By Noor Nanji & Faisal Islam
- BBC News
Slowing food prices helped drive a surprise fall in inflation in August, with the price of dwelling now at its lowest stage in a 12 months and a half.
Inflation, which measures how prices change over time, fell to 6.7% in the 12 months to August, down from 6.8% in July, official figures present.
It is the third month in a row that the determine has dropped.
Price rises for milk, cheese and eggs slowed probably the most, whereas fish and vegetable prices additionally eased.
There was additionally a drop in lodge and air fare prices, though gasoline prices jumped.
When the speed of inflation falls, it doesn’t imply prices are coming down, however that they’re rising much less shortly.
August’s determine was a surprise as many economists had anticipated the determine to extend as a consequence of rising gasoline prices.
Chancellor Jeremy Hunt mentioned the information confirmed “the plan to deal with inflation is working”.
“But it is still too high which is why it is all the more important to stick to our plan to halve it so we can ease the pressure on families and businesses,” he added.
But Labour’s shadow chief secretary for the Treasury, Darren Jones, mentioned the surprise fall in inflation was “nowhere near” sufficient.
“[It] will mean very little to families across the country that can’t afford to pay their bills.”
Food prices went up around the globe following Russia’s invasion of Ukraine, which was one of many elements pushing up prices at grocery store tills.
The warfare disrupted provides from the 2 nations, that are main exporters of products equivalent to sunflower oil, wheat, and fertiliser.
But the speed of food inflation, whereas nonetheless very excessive and in double digits, has been slowing in latest months.
Price rises for food and non-alcoholic drinks eased to 13.6% in the 12 months to August, down from 14.9% in July, in accordance with the Office for National Statistics (ONS).
Grant Fitzner, chief economist on the ONS, mentioned it remained “a mixed picture”, with the worth of some gadgets equivalent to bread and cereals nonetheless going up, whereas others are falling.
“So in the latest month we’ve seen falls in fish, in oils and fats and in vegetables,” he instructed BBC Radio 4’s Today programme.
“Food manufacturers are paying less for food than a year ago,” he added, and that is “starting to pass through to consumers.”
Nick Collins says prospects are nonetheless spending regardless of excessive prices.
The drop is probably excellent news for customers who’ve seen purchasing and restaurant payments soar.
Nick Collins runs Lounges PLC, which owns cafes, bars, eating places and roadside diners. He instructed the BBC that rising food prices had compelled him to place up prices by 8% throughout the enterprise during the last 12 months.
“In normal years, we’d increase our prices by around 1.5% or 2%,” he mentioned.
However, Mr Collins mentioned he had seen “absolutely no shift in customer behaviour” and other people weren’t “tightening their belts”.
“It they were you’d see fewer people out at the start of the week. You’d see less spending as you approach payday… We haven’t seen any of that.”
What does this imply for rates of interest?
Since December 2021, the Bank of England has put up rates of interest 14 occasions in a row to attempt to curb rising prices.
But these newest figures increase questions over whether or not the Bank will enhance them once more at its subsequent assembly on Thursday.
While inflation stays excessive and effectively above goal, it has now fallen for 3 months consecutively.
All in all, it will give some assist to officers on the Bank’s Monetary Policy Committee – which set charges – who need to restrict additional charge rises. Another rise tomorrow, from 5.25% to 5.5%, remains to be seemingly, however that may very well be the final one.
The newest inflation knowledge additionally suggests the federal government is extra prone to meet its pledge to halve inflation this 12 months.
Speaking to reporters on Wednesday the chancellor mentioned: “The independent forecasters are saying that we are on track to meet the prime minister’s target, so let’s see what happens.”
At 6.7%, the UK’s inflation charge stays excessive in comparison with different wealthy nations.
According to newest figures, inflation is 6.4% in Germany, 5.7% in France, 5.5% in Italy and 2.5% in the US.
How can I lower your expenses on my food store?
- Look at your cabinets so you understand what you may have already
- Head to the decreased part first to see if it has something you want
- Buy issues near their sell-by-date which can be cheaper and use your freezer
Additional reporting by Priya Patel and Raphael Sheridan.
