Economy

United Kingdom inflation fell back to three per cent last month

United Kingdom inflation fell back to three per cent last month

When the official consumer prices index for December comes out on Tuesday, the City expects it to have eased to 3 per cent from 3.1 per cent in November, which was the highest figure in almost six years.

In January previous year, inflation stood at just 1.8 per cent, but it had risen to 3.1 per cent by November 2017.

This was the eleventh consecutive disinflation (slowdown in the inflation rate though still positive) in headline year on year inflation since January 2017.

But James Tucker, a statistician who compiled the figures, said: "It remains too early to say whether today's slight fall is the start of any longer-term reduction in the rate of inflation". On the other hand, inflation in manufactured products remained at the same level as before (2.6 per cent).

"Though annual inflation is falling, that says more about price changes a year ago than now - don't expect it to drive a big jump in quarterly real consumption growth".

Inflation jumped in Britain after the decision by voters in June 2016 to leave the European Union which hammered the value of the pound and pushed up the cost of imports. The rate came in line with expectations and was the first decrease in six months.

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Hargreaves Lansdown senior economist Ben Brettell said apart from the "Brexit noise", the UK's economic situation is in keeping with the majority of the developed world, with an ageing demographic and disruptive technologies causing price pressure and limiting the BoE's incentive to hike rates.

It, however, stated that the rural inflation rate also eased by 15.02 per cent in December from 15.59 per cent in November.

Costs lifted by 2.7 per cent month-on-month in December, compared with a 0.2% rise for the same month in 2016. A core measure of consumer-price growth slipped to a five-month low of 2.5%.

"More worrying from our point of view is the continuing stagnation of wages, with increases tending to be well below the rate of inflation", he said.

Persistently high inflation also holds implications for people's savings, as inflation erodes the spending power of future interest payments and eats away at the worth of the original capital. Inflation was forecast to slow to 2.6%.

Jacob Deppe, head of trading at Infinox, said: "Continuing price rises are unhelpful for households struggling with below inflation wage rises but perhaps there is a chink of light at the end of the tunnel".


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