In January, the UK inflation rate declined for the third month in a row to 10.1%, falling short of experts’ predictions, but high food and energy costs continued to put pressure on British families.
Reuters surveyed economists, who predicted that inflation would fall to 10.3% from 10.5% in December. Inflation has steadily declined after reaching a 41-year high of 11.1% in October.
According to the ONS, the core CPI, which excludes food, energy, alcohol, and tobacco, was 5.3% in January, down from 5.8% in December.
According to the organisation, the highest price increases were in housing, gas and electricity, food, and non-alcoholic drinks, while the biggest price cuts were in transportation, restaurants, and hotels.
According to Richard Ollive, senior adviser with financial services business Wesleyan, while the inflation rate has reduced, it’s vital to realise that prices aren’t necessarily going to start declining.
Prices are going to keep rising, just not as quickly. “Pressure on budgets will still be painfully tight, especially if people’s pay packets haven’t grown as quickly as their bills,” Ollive said in an analyst note.
Worker compensation continues to lag behind inflation, with average total pay increasing by 5.9% year over year among UK employees between October and December, according to the ONS on Tuesday.
According to David Bharier, Head of Research at the British Chambers of Commerce, businesses will continue to experience the consequences.
“Most small firms remain hammered by rising costs from energy, raw materials, interest rates, taxation, and new trade barriers with Europe,” Bharier said in a research note.
“Businesses are desperate for concrete action in the upcoming budget across a range of areas. “The issues of childcare and energy costs in particular must be solved to help unlock firms’ growth potential and control inflation.”
Inflation rates rose during 2022, owing mostly to rising energy prices as a result of Russia’s invasion of Ukraine, which impacted oil and gas supply.
On February 2, the Bank of England hiked interest rates by 50 basis points and predicted a “far smaller” recession than originally anticipated.
The central bank raised its key interest rate to 4%, with annual CPI inflation expected to decline to 4% by the end of 2023.
