As inflation rates drop to 7.9%, a milder outlook than predicted, some light relief may hit UK households as the Bank of England eases its response
A surprise inflation rate drop has caught the UK unawares, per the consumer prices index and Office of National Statistics (ONS).
Although the UK continues to have the highest inflation in the G7 group- and prices still rising overall- the ONS described the rate of increase as having “slowed substantially” to the lowest annual level since March 2022.
Experts had predicted that the previous rate of 8.7% would only decrease by 0.5% rather than 0.8%.
Responses have ranged from quiet optimism to continued disdain
Chancellor Jeremy Hunt is careful to keep expectations reasonable, reiterating that “we aren’t complacent and know that high prices are still a huge worry for families and businesses.
“The best and only way we can ease this pressure and get our economy growing again is by sticking to the plan to halve inflation this year.”
Shadow chancellor Rachel Reeves decried the UK’s continued role of having the highest inflation in the G7, calling it a “hallmark of Tory economic failure”.
The Lib Dems’ Treasury spokesperson Sarah Olney said the figures would be “cold comfort to countless families worried about their mortgage going up”.
Fuel prices appear to be levelling out, but food inflation remains high, hitting households hard.
Costs could decrease for construction materials
ONS chief economist Grant Fitzner observed that whilst manufacturing industries still faced high prices, sectors such as construction may see material costs softening in the near future.
@GrantFitzner also said: (3/3) 💬 pic.twitter.com/hneBMQjsfs
— Office for National Statistics (ONS) (@ONS) July 19, 2023
Construction industry reactions to the surprise inflation rates drop
Marc Vlessing, CEO of Pocket Living said:
“While today’s drop in headline inflation is to be welcomed, we still remain the country with the highest inflation in the G7. This will undoubtedly result in interest rates remaining higher for longer which will continue to punish many of the priced-out generation who barely managed to get onto the property ladder.
“We are now seeing interest rates on first time buyer mortgagees of upwards of 7% and as a result monthly mortgage costs have gone up by 40% in comparison to a year ago. Further to this, continued high inflation and interest rates will continue to hit developers hard and we are likely to see starts, especially within London, fall considerably.”
You can read the ONS figures and analysis in full here.
