UK inflation has fallen to its lowest rate in eight months – 3.2% – as a sharp drop in food and drink prices knocked consumer costs downwards.
Official statistics released this morning showed November’s inflation rate was 30 basis points below the expected 3.5% rise in consumer costs. November’s rate of inflation was also slower than October’s 3.6%.
Food and non-alcoholic beverages accounted for the largest part of inflation’s fall, slowing from October’s 4.9% upswing to a more modest 4.2% increase compared to twelve months ago. Though a smaller proportion of shopppers’ baskets, alcohol and tobacco also dropped sharply, down from 5.9% to 4.0%.
IGD chief economist James Walton was confident that estimates of 4.3% inflation for 2025 would hold true.
”Whilst we expect inflation to slowly decline to 3.8% in 2026, the reality is that the cost of food is creating a huge amount of financial pressure for shoppers at all income levels. It will therefore be absolutely crucial for grocery retailers to focus on value during the critical Christmas trading period,” he said.
A drop in the cost of staples contributed to falling prices, with olive oil down 16.2%, flours down 6.1%, and pasta and sugar both cheaper by 4% – though beef and veal prices rose the fastest at 27.7%, with chocolate in second at 17.3%.
Karen Betts, FDF chief executive, said while it was good to see inflation start to fall, especially in the lead-up to Christmas, food prices remain higher than for last year’s festivities.
”Many consumers are having to make tough choices about what they buy this year. Manufacturers continue to work hard to cut costs and pass any potential savings on to consumers, but themselves continue to face significant cost pressures.
”To really impact this persistent food inflation, we need Government to redouble efforts with food businesses to reduce costs, like energy, and boost growth and productivity to bring down prices in the coming weeks and months across the food and drink supply chain.”
The lower-than-expected inflation results will be a boon to business, thanks to an interest rate cut eagerly expected by markets from the Bank of England.
“As Christmas gifts go, this is a most welcome one. It’s the time of year when people put a few more things in their supermarket trolley, so news that food and alcohol inflation has fallen will be a boon for cash strapped families,” said Danni Hewson, AJ Bell’s head of financial analysis.
“Inflation has proved stubbornly resilient over the course of the year but there are signs that we’ve scaled the sneaky second peak. Although 3.2% is still way above the Bank of England’s target, it is expected to be the final piece in the puzzle which will enable rate setters to deliver their own festive gift to borrowers with an interest rate cut on Thursday.”
However, Hewson warned: “What we must remember is that falling inflation doesn’t mean the cost of living is getting cheaper, and many households are still reeling from the impact of the mega price hikes we’ve endured over the past few years.
“But the bigger than expected fall in headline CPI is good news and will help boost people’s spending power and confidence. And with so much of the UK economy reliant on household spend, it could also signal better news for the UK’s flatlining growth.”
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