Price increases in the United Kingdom fell for the second consecutive month, although the price of food like milk, cheese, and eggs kept inflation at a forty-year high.
Inflation, which gauges the rate of price increases, decreased from 10.7% in November to 10.5% in December.
The price of gasoline and fuel decreased last month, while food prices reached their highest level since 1977.
In addition to a record increase in airfare, restaurant and hotel prices also increased in December.
As Covid regulations loosened and Russia launched its invasion of Ukraine, the cost of life has progressively risen, causing hardship for millions of individuals.
According to the Office for National Statistics, food costs increased 16.8% in the year leading up to December, and many households splurged for the holiday (ONS).
Milk, cheese, and eggs suffered the greatest price hikes. Sugar, jam, honey, and chocolate, as well as soft beverages and juices, experienced price increases. However, the price growth of bread and grains slowed.
Philip de Ternant, the proprietor of Creed Foodservice in Cheltenham and a food distributor, stated that the previous year witnessed a “tsunami” of food price increases.
The price of baked beans has increased by more than 50 percent in the past year, he claimed. “Spanish canned tomatoes also increased by 50%. Pasta, a key ingredient for so many chefs, has increased by 24%.”
UK inflation falls
Inflation is the increase in price over time, and the ONS monitors the prices of hundreds of ordinary items to determine it.
If it lowers, it does not indicate that goods prices are decreasing. Rather, it indicates that prices are rising more slowly.
After reaching what is regarded to be its peak, 11.1%, in October, some analysts predict the cost of living may now be slowly beginning to decrease.
However, at 10.5%, UK inflation is well beyond the 2% objective that the Bank of England is tasked with achieving.
Grant Fitzner, the chief economist at the ONS, stated that a factor in the decline in inflation was the 8p per liter and 16p per liter decline in gasoline and diesel prices, respectively, over the past month.
In December 2022, the average price per liter of gasoline and diesel was £1.55 and £1.79, respectively.
“It’s important to note that even though we’ve seen a second straight rate decrease, the decline has been quite moderate, and inflation is still at a very high level, with overall prices growing quickly,” he added.
There are several obstacles to a precipitous decline in inflation.
Mr. Fitzner stated that the private sector salary increase of 7.2% in the three months preceding November was the “strongest in decades.” The average wage has increased at the fastest rate in more than two decades. But it has failed to keep pace with inflation.
Coach and air tickets also increased significantly in December, with the cost of air travel increasing by 44.1%, the highest increase since January 1989.
Even though inflation has decreased for the second consecutive month, Susannah Streeter, senior investing and markets analyst at Hargreaves Lansdown, stated that there is still a “far way to go” until the price spiral is under control.
She continued, “With the labor market remaining tight, energy prices expected to remain elevated. And food price increases continuing unabated, inflation will persist for longer.”
Since December 2021, the Bank of England has been increasing interest rates to combat inflation; they are at 3.5%. The Bank will conduct its next meeting to determine interest rates in February.
Increasing interest rates is one method for attempting to limit inflation. As it increases the cost of borrowing and should encourage individuals to borrow less and spend less.
Ms. Streeter stated that the United Kingdom should be prepared for additional interest rate hikes from the Bank. Adding that a jump of 0.5 percentage points “remains a distinct possibility.”
Inflation is expected to fall by more than half during the next year, not because of any government action. But because current prices are lower than they were one year ago.
UK inflation falls, but food prices remain elevated
The significant increase in fuel prices began in February of last year. After March, the disparity between current prices and those from a year ago will appear less pronounced.
The Office for Budget Responsibility’s official estimates has thus far shown to be relatively accurate, predicting that inflation would peak at approximately 11% last autumn before declining.
It has been predicted that the rate of inflation will fall to less than 7% by this summer and 4% by the end of the year. But it’s difficult to believe that it also predicts inflation will become negative in the middle of 2024.
While this may result in a slight decrease in the cost of living, it will not come close to compensating for the predicted decline in living standards, which will be the worst in over four decades.
The Chancellor, Jeremy Hunt, stated that while any decline in inflation was “good”. It was “crucial” that the government make “tough decisions” to further reduce it.
In contrast, Shadow Chancellor Rachel Reeves stated, “Each day brings more evidence that people are feeling worse under the Conservatives.
Prime Minister Rishi Sunak has committed to cutting inflation in half this year, but many economists believe this would not be possible due to the falling cost of electricity.
Mr. Hunt stated, “High inflation is a nightmare for family budgets, undermines company investment, and leads to striking action. So no matter how difficult, we must stick to our plan to reduce it..
