Inflation data delivers good news for shoppers

ONS has now published official inflation data to cover October 2023.

As anticipated by many analysts, the headline “all items” CPI inflation measure has fallen sharply, from +6.7% year-on-year in September to +4.6% in October, the lowest rate for about two years.

This meets the Prime Minister’s pledge to halve inflation over the course of 2023 (assuming no unexpected increase in inflation before year-end).

The abrupt slowdown was delivered primarily by a sharp drop in inflation for food and drink, coupled with falling prices for domestic energy.

Inflation for “core items” (eg: clothing, household durables) and, in particular, consumer services (eg: eating out) remains quite persistent however, the latter being strongly influenced by rising labour costs.

Food price inflation in October was slightly below IGD expectations, raising the possibility that rates at year-end might undershoot the forecast – IGD welcomes this.

Most food categories saw weaker-than-expected inflation, possibly due to price reductions for some commodities, although inflation for beverages was higher-than-expected.

IGD Viewpoint

This sharp reduction in inflation will be welcomed by hard-pressed shoppers, although prices are still rising unusually fast.

Many workers are now seeing wage growth exceeding inflation, meaning that “real pay” is at last beginning to “catch-up” with living costs.

Hopefully, this improvement will soon be reflected in stronger consumer confidences and less concern over food prices. IGD’s ShopperVista service will pick up on this if it happens.

Weakening inflation also reduces the likelihood of further interest rate rises, although the Bank of England has emphasised that major rate cuts cannot be expected for some time – they intend to wait until they are quite certain that inflation pressure has eased.

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