UK inflation declined at the sharpest rate in 16 months to 10.7% in November as the momentum behind the rising cost of clothing and petrol began to ease amid growing fears of a long recession.
The drop in the consumer prices index figure was slightly bigger than expected by most City analysts, who forecast the annual rate of price rises would slide to 10.9% last month, from 11.1% in October.
However, prices were still rising, albeit at a slower rate, and the increasing costs will add to the pressure on ministers to put up wages across the public sector to close the gap between earnings and rising prices.
The measure of inflation used by most trade unions as the basis for annual pay claims – the retail prices index – fell only marginally from 14.2% to 14% in November.
Forecasts of a recession lasting until the end of 2023 have triggered falls in the price of crude oil since last year, bringing down the cost of transport. Meanwhile, the rising cost of clothing has begun to wane, forcing retailers in Europe and the US to increase stockpiles as consumers pull back from replenishing their wardrobes.
Fuel prices rose by 17.2% in the year to November 2022, down from a 22.2% increase in the year to October, while prices of clothing and footwear rose by 7.5% – down from an 8.5% annual inflation rate in October.
Secondhand car prices also played a part in the easing back of inflation. Prices fell by 5.8% in the year to November, having jumped by more than 31% between March and November 2021.
The Office for National Statistics said the cost of hospitality, hotels and restaurant food played the biggest role in pushing prices higher in November by 10.2% from 9.6% in October.
Bank of England officials are expected to come under intense pressure to increase interest rates when they meet on Thursday to set the central bank’s base interest rate. The monetary policy committee is predicted to push the base rate up by 0.5 percentage points to 3.5%.
MPC members are known to be concerned that double-digit inflation will trigger a wave of high wage claims, leading to a further round of price rises next year.
So far, figures for wage claims across the private and public sector average only 4%, leading to large falls in average living standards.
Jack Leslie, a senior economist at the Resolution Foundation thinktank, said: “Britain may now be past its inflation peak, which is good news for policymakers at both the Bank and Treasury as they grapple with rising interest rates and public debt.
“But with price rises still massively outstripping pay rises – and Britain’s poorest families facing an inflation rate of over 12% – families are still getting poorer month on month, and the cost of living crisis will continue to deepen in 2023.”
Jeremy Hunt said he expected the UK’s economic situation would get worse before it began to improve.
The chancellor added: “The aftershocks of Covid-19 and Putin’s weaponisation of gas mean high inflation is plaguing economies across Europe, and I know families and businesses are struggling here in the UK.
“Getting inflation down so people’s wages go further is my top priority, which is why we are holding down energy bills this winter through our energy price guarantee scheme and implementing a plan to help halve inflation next year.”
Inflation has begun falling in most major industrialised countries after a decline in the cost of petrol and a slower rate of price growth for many high street items, including clothing.
Figures released on Tuesday showed annual consumer price inflation in the US slowed to 7.1% in November, down from 7.7% in October.