Good news on inflation comes with some big caveats
Reacting to the latest inflation figures, Julian Jessop, economics fellow at the Institute of Economic Affairs said: “The news that inflation is falling more quickly than expected is mostly welcome, but it may also be a warning that the risks of recession are rising.
“The decline in the CPI measure to 3.2% in November, from 3.6% in October, is another step in the right direction and surely enough to seal a rate cut from the Bank of England tomorrow.
“UK inflation is still some way above the MPC’s 2% target and 1% higher than in the euro area (where the flash estimate for November was 2.2%), but at least these gaps are closing.
“Nonetheless, prices are still rising from already high levels, just at a slightly slower pace. This is especially true of food prices, where the annual inflation rate was still 4.2%.
“Moreover, the aggressive price discounting in clothing and footwear and in household goods suggests that pre-Budget jitters turned Black Friday into Black November. This is not necessarily healthy, or sustainable.
“The fall in inflation was mainly in goods inflation, which slowed from 2.6% to 2.1%, while services inflation only edged down slightly from 4.5% to 4.4%. Services inflation is often higher than goods inflation, but this may not ease concerns about the continued pass-through of high labour costs.
“In short, the fall in inflation is good news, but this early Christmas present has plenty of strings attached.”