UK inflation eased slightly in November, dropping 0.4 percent from October to 10.7 percent.
This is a significant change from the 1.0 percent increase to 11 percent between September and October. Despite this, price increases are still proving a persistent problem for many.
Richard Carter, head of fixed interest research at Quilter Cheviot, argued the issue of rising food prices and increasing household energy bills “remains firmly in place”.
“However, considering the US also saw better than expected inflation data yesterday, it is encouraging that we may finally be passing the peak of inflation.”
For some, it will only be relatively recently that they have noticed the increase in energy bills, given the autumn was mild in most parts of the UK.
“Temperatures have taken a sharp dive in the last week or so, and the demand for gas will no doubt have increased as people are forced to heat their homes,” Mr Carter explained.
“While the government support remains in place for now, any changes made once the April deadline is reached could have a knock-on effect on inflation.”
While today’s figures may suggest inflation is now past the peak, many will still feel price rises acutely, especially in the run up to Christmas.
Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown, warned that given prices for UK consumers have “scaled a mountain, there is still a vertiginous descent to navigate before it’s back down to less dangerous levels.
“Lower fuel and second-hand car prices have helped bring down the headline CPI rate but price pain continues in many parts of the economy with increases in alcohol costs in pubs, cafes and restaurants particularly onerous.”
For now, eyes will turn to the Bank of England as it announces its next interest rate decision tomorrow (15/12/2022).
A 0.5 percentage point hike to 3.5 percent is widely anticipated as inflation remains persistently high and is expected to average around 7.0 percent in 2023.
Daniele Antonucci, the chief economist and macro strategist at Quintet Private Bank, looked further ahead.
He suggested tighter financial conditions are likely to be shown in lower economic activity, consumer confidence and retail sales.
“We think the UK economy will be in recession for a good part of 2023.
“A good dose of fiscal austerity, demand destruction as rates rises feed through, a slight appreciation of the currency, lower commodity prices, and gradual supply-chain normalisation are all factors that should moderate inflation,” he concluded.
