Economic data ends year on a high as inflation falls to a 26-month low 20 December 2023 A year of poor economic data ended on a high as CPI inflation fell by more than markets expected to 3.9 per cent in November – its lowest level since September 2021. But while inflation should continue to fall next year, there are likely to be bumps in the road, reminding us all that cost-of-living pressures are still with us, the Resolution Foundation said today (Wednesday). Headline inflation fell from 4.6 to 3.9 per cent between October and November, with the recent fall driven by falling oil prices feeding through into lower transport costs, as well as cheaper toys, computer games and concert tickets. Food price inflation continues to fall – down to 9.2 per cent from a peak of 19.6 per cent in March 2023. Services inflation – domestically generated inflation that is watched closely by the Bank of England – also fell to 6.3 per cent and is below the Bank’s forecast of 6.9 per cent, strengthening the case that recent rate rises are having their desired effect on reducing inflation. Inflation is moving in the right direction, and faster than the Bank has forecast. However, cost-of-living crisis pressures are still with us. In November 2023, food prices were 29 per cent higher than they were in September 2021, and energy prices were 66 per cent higher. This helps to explains why, in a recent Resolution Foundation survey, twice as many families said that their finances had got worse through the autumn than got better. The Foundation adds that, while 2024 should mark another year of falling inflation, it will be hard to match the big falls seen in recent months. CPI inflation may even increase in January, and the Bank is not forecasting inflation to fall below 3 per cent until early 2025, after the next General Election. Lalitha Try, Economist at the Resolution Foundation, said: “A sharp fall in inflation in November marks a welcome end to a year to disappointing economic data. Having started the year with double digit inflation, families will be relieved to see inflation falling below four per cent, with food and fuel cost pressures all coming down. “However, the sheer scale and duration of the cost-of-living crisis means that any declarations of victory in the battle to tame inflation are premature. Households are still feeling the pinch. “Similarly large falls are unlikely next year, and inflation could remain elevated until after the next General Election.”
