Lower Clothing Prices Help Inflation Fall More Than Expected

Inflation in the United Kingdom dipped to 3.2% in November, marking an eight-month low and exceeding analysts' forecasts. The drop, from 3.6% the previous month, was largely influenced by decreasing prices in sectors like food, alcohol, and clothing.

Grant Fitzner, chief economist at the Office for National Statistics (ONS), noted that the decline in food prices was a primary factor, particularly for items like cakes, biscuits, and breakfast cereals.

The news arrives just before the Bank of England's upcoming decision on interest rates, scheduled for Thursday, where a rate cut is widely anticipated. The decrease in inflation is expected to fuel optimism that inflation has peaked, potentially setting the stage for additional interest rate reductions in the coming year.

Several other categories also contributed to the overall decrease in inflation, including tobacco, restaurant meals, hotel stays, furniture, and transport costs.

While prices are generally still increasing across the economy, some items saw price reductions between October and November. Food prices, which had the most significant impact on the lower inflation figure, went against the typical seasonal trend by falling between October and November, decreasing by 0.2 percentage points. That said, the reality is a bit more complicated. food prices still rose by 4.2% in the year leading up to November, a decrease from the 4.9% increase in the year leading up to October.

Chancellor Rachel Reeves acknowledged the inflation decrease and its importance to families across Britain. She stated that lowering household bills remains her top priority, highlighting measures already implemented, such as freezing rail fares and prescription fees, and the £150 energy bill cut announced in the Budget.

The Consumer Prices Index (CPI), which the ONS uses to measure UK inflation, considers a range of goods and services, including items like bread, fruit, and clothing.

The fall in inflation led to a sell-off of the pound, which decreased by 0.7% against the dollar.

Alyssa Heath, from the Band of Bakers collective in Camberwell, mentioned that the sustained period of higher prices has affected her ingredient choices for baking. While basic items like flour and sugar remain affordable, she finds herself using more expensive ingredients like nuts and dairy less frequently.