15 November 2023
If you are covering the latest UK inflation data, please find below a comment from Lindsay James, investment strategist at Quilter Investors:
“The Prime Minister will be breathing a deep sigh of relief today, especially given the political events of the last few days. Halving inflation was meant to be the easiest of his five priorities to achieve as it was a year on year comparison, and 2022 saw inflation rise sharply. Although things got a little close for comfort, today’s sharp drop in inflation to 4.6% is a positive step on the long road back to target levels. However, this has been predominantly driven by factors that look unlikely to be repeated in the months ahead.
“Energy prices are the most significant contributor to the fall, with gas costs highlighted as 31% lower in the year to October 2023, and electricity costs down 15.6%. Unfortunately the loss of £400 of support from the government per household towards energy bills makes the real impact on consumers ‘cost of living’ far more modest, whilst gas prices have recently moved higher, reflecting global supply constraints, which will feed into a higher Energy Price Cap from January onwards.
“Food appears to be seeing more consistent reductions, with this the seventh month of falling annual inflation readings, supported by a trend of falling prices for domestically produced food, increased competition amongst the supermarkets, and generally lower soft commodity prices.
"Whilst this headline data will on the face of it be welcome news for the MPC, they will want to see more evidence of slowing inflation across the economy, rather than it coming primarily from fluctuations in international energy markets. With Core CPI (excluding energy, food, alcohol and tobacco) falling more gradually, now at 5.7% and down from 6.1% in September, it is clear that further progress towards the target of 2% is likely to be relatively slow.”
