(qlmbusinessnews.com Wed, 20th Sept, 2023) London, UK —
“Slowing Food Prices Lead to Surprise Fall in UK Inflation Rates”
Food prices slowing down significantly contributed to a surprising drop in inflation in August, causing the cost of living to reach its lowest point in a year and a half.
Official figures reveal that inflation, which gauges price changes over time, decreased from 6.8% in July to 6.7% in the year to August. This marks the third consecutive monthly drop.
Among the items that saw slower price increases were milk, cheese, eggs, fish, and vegetables. Additionally, hotel and airfare costs declined, even though fuel prices rose.
It's important to note that a decrease in the inflation rate doesn't mean prices are dropping; rather, they are increasing at a slower rate.
The unexpected decline in August's inflation rate contrasted with the expectations of many economists who anticipated an increase due to rising fuel prices.
Chancellor Jeremy Hunt stated that this news indicates that “the plan to deal with inflation is working.” However, he emphasized the importance of sticking to the plan to halve inflation to alleviate pressure on families and businesses.
In response, Darren Jones, Labour's shadow chief secretary for the Treasury, commented that the fall in inflation was “nowhere near” enough and would not make a significant difference to families struggling to pay their bills.
Global food prices surged following Russia's invasion of Ukraine, affecting prices at supermarkets. This conflict disrupted supplies from major exporting countries like Russia and Ukraine, impacting items such as sunflower oil, wheat, and fertiliser.
While food inflation remains high and in double digits, it has been slowing in recent months. In the year to August, price increases for food and non-alcoholic drinks eased to 13.6%, down from 14.9% in July, according to the Office for National Statistics (ONS).
Grant Fitzner, chief economist at the ONS, noted that it's still a mixed picture, with some items, like bread and cereals, continuing to rise in price while others are falling. He also mentioned that food manufacturers are paying less for food than they were a year ago, and this is starting to benefit consumers.
This drop in food prices could be good news for consumers who have seen their shopping and restaurant bills rise substantially.
Regarding interest rates, the Bank of England has raised them 14 times since December 2021 in an attempt to control inflation. However, these latest inflation figures raise questions about whether the Bank will continue to increase rates at its next meeting. While inflation remains high, its three consecutive monthly declines may support officials on the Bank's Monetary Policy Committee who want to limit further rate hikes.
The latest inflation data also suggests that the government is more likely to achieve its goal of halving inflation this year.
Although the UK's inflation rate of 6.7% is still high compared to other wealthy countries, it's lower than inflation rates in Germany (6.4%), France (5.7%), and Italy (5.5%). The US has a lower inflation rate of 2.5%.
A recent forecast from the Organisation for Economic Co-operation and Development (OECD) indicated that the UK is likely to experience faster price increases than any other advanced economy this year.
If you or your family are affected by inflation, please share your thoughts in the comments below this video.
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