UK inflation fell to its highest rate in 16 months to 10.7% in November as the momentum behind the rising cost of clothing and petrol began to fade in amid growing fears of a long recession.
The fall in the consumer price index was slightly larger than expected by most City analysts, who expected the annual rate of price increases to fall to 10.9% last month from 11.1 % in October.
However, prices continued to rise, albeit at a slower pace, and rising costs will add to the pressure on ministers to raise public sector wages to bridge the gap between income and rising prices.
The measure of inflation used by most unions as the basis for annual wage demands – the retail price index – fell only slightly, from 14.2% to 14% in November.
Forecasts of a recession until the end of 2023 have caused the price of crude oil to fall since last year, lowering the cost of transport. Meanwhile, the rising cost of clothing has started to ease, forcing retailers in Europe and the United States to increase inventory as consumers forego restocking their wardrobes.
Fuel prices rose 17.2% on the year to November 2022, compared to a 22.2% increase on the year to October, while prices for clothing and footwear rose by 7.5% – compared to an annual inflation rate of 8.5% in October.
Used car prices also played a role in lower inflation. Prices fell 5.8% on the year to November, after jumping more than 31% between March and November 2021.
The Office for National Statistics said the cost of hospitality, hotels and restaurants played the largest role in pushing prices up in November by 10.2% from 9.6% in October.
Bank of England officials are expected to come under intense pressure to raise interest rates when they meet on Thursday to set the central bank’s base interest rate. The monetary policy committee should increase the base rate by 0.5 percentage point to 3.5%.
MPC members are known to fear double-digit inflation could trigger a wave of high wage demands, leading to another round of price hikes next year.
So far, wage demand figures in both the private and public sectors average only 4%, leading to a sharp decline in the average standard of living.
Jack Leslie, senior economist at the Resolution Foundation think tank, said: “Britain may have passed its inflation peak, which is good news for policymakers at the Bank and Treasury as they are grappling with rising interest rates and rising public debt.
“But with price rises still massively outpacing pay rises – and Britain’s poorest families facing an inflation rate of over 12% – families continue to get poorer month by month. , and the cost of living crisis will continue to worsen in 2023.”
Jeremy Hunt said he expected the UK’s economic situation to get worse before it started to improve.
The Chancellor added: “The aftershocks of Covid-19 and Putin’s weaponization of gas mean high inflation is plaguing European economies, and I know families and businesses are struggling here in the UK.
“Reducing inflation so people’s wages go up is my top priority, which is why we are keeping energy bills down this winter through our energy price guarantee scheme and implementing a plan to help halve inflation next year.”
Inflation began to decline in most major industrialized countries after a drop in the cost of gasoline and a slowdown in the rate of price growth for many retail items, including clothing.
Figures released on Tuesday show that annual consumer price inflation in the United States slowed to 7.1% in November from 7.7% in October.
