AJ Bell press comment – 18 January 2023
- CPI falls to 10.5% with prices at the pump and cheaper clothes a big driver
- Food costs still heading upwards
- Core inflation sticks stubbornly at 6.3%
Danni Hewson, AJ Bell financial analyst, comments on the latest UK inflation figures:
“It’s the first time since the start of the pandemic that inflation has fallen for two months in a row. Though the fall won’t feel significant to people heading off to do their weekly shop, in fact they won’t feel it all because hidden within today’s good news is quite a bit of bad news.
“Whilst prices at the pump have been falling, now back to levels last seen in February 2022, a lot of the important stuff is still going up. Energy costs, despite the government shaped cushion that’s in place, are still making a big impact on our lives and as temperatures plummet our energy saving measures have done all they can to limit bill rises.
“Then there’s food. The Christmas shop had to be spread out over a couple months just to make all those treats vaguely affordable. Chocolate and sweets that are a staple of most homes over the festive season were among those items in our basket with a much bigger price tag than we’re used to. And other less seasonal staples like milk, cheese and eggs are still driving prices up at a rate that will keep making life difficult for many people.
“But there is a little balance, rather than everything creeping relentlessly upwards at an ever-increasing rate, there is a now a spread. Price rises in clothing, shoes, furniture and recreation have slowed somewhat with pre-Christmas sales by retailers designed to draw us into stores.
“But those sharing a drink with friends or attending the work’s Christmas do might not have been feeling the festive cheer when they divvied up the bill at the end of the night.
“And for central bankers there are a couple of warning signs flashing furiously. First service inflation has shot up from 6.3% in November to 6.8% suggesting that the tight labour market which has pushed up wages is filtering through to prices. And the core figure that strips out energy, food, tobacco and alcohol has remained stubbornly static at 6.3%.
“There will be plenty of focus today on the Bank of England’s next move with markets currently pricing in another 0.5% hike at the next meeting in February. Two percent still feels like a battery powered bunny running round and round the track and lapping the pack by a good couple of leagues.”
