Inflation falls to two-year low of 4.6% as energy costs begin to ease.

Inflation has fallen to a two-year low of 4.6% as energy costs begin to ease.

While this decrease from September’s 6.7% rate offers some relief, the cost of living crisis continues to significantly impact consumers.

The decrease reflects a stabilisation in food prices, but lower inflation doesn’t mean lower prices; it just means that the rate at which prices are rising has slowed.

Richard Walker, the boss of Deeside-based Iceland, said: “Prices are still going up. But I think we definitely have peaked overall. And we’re starting to pass on price savings to customers.”

The rate decrease was also helped by significant drops in gas and electricity prices.

Gas costs saw a record annual fall of 31.0% in October 2023, contrasting with a rise in September. Similarly, electricity prices also dropped by 15.6% over the year to October 2023, the lowest since records started in January 1989.

Despite these decreases, gas and electricity prices were still substantially higher than in October 2021, by approximately 60% and 40% respectively. Overall, energy costs, including electricity, gas, and other fuels, fell by 6.9% from September to October 2023, with a yearly reduction of 21.7%.

Grant Fitzner, Chief Economist at the Office for National Statistics (ONS), notes that the reduction in inflation follows a significant rise in energy costs last year, which is now being somewhat offset.

He said: “Inflation fell substantially on the month as last year’s steep rise in energy costs has been followed by a small reduction in the energy price cap this year.”

“Food prices were little changed on the month, after rising this time last year, while hotel prices fell, both helping to push inflation to its lowest rate for two years.”

“The cost of goods leaving factories rose on the month. However, the annual growth was slightly negative, led by petroleum and basic metal products.”

[Annual inflation rates for the last 10 years, UK, October 2013 to October 2023 – source ONS]

In a post on X (formerly Twitter), Prime Minister Rishi Sunak said: “In January, I made halving inflation this year my top priority. I did that because it is, without a doubt, the best way to ease the cost of living and give families financial security.
“Today, we have delivered on that pledge.”

Shadow Chancellor Rachel Reeves said: “The fall in inflation will come as some relief for families struggling with the cost of living.

“But now is not the time for Conservative ministers to be popping champagne corks and patting themselves on the back.

“After 13 years of economic failure under the Conservatives, working people are worse off with higher mortgage bills, prices still rising in the shops, and inflation twice as high as the Bank of England’s target.

“Rishi Sunak is too out of touch, and his party is too divided to help people who are worried about the cost of living.

“A Labour government’s priority would be making working people better off by boosting wages, cutting people’s bills, and getting the economy growing again.”

Despite the positive trend in inflation, Rocio Concha, Director of Policy and Advocacy at Which?, highlights the ongoing challenges facing consumers.

According to Which?’s latest data, 2.1 million households missed essential bill payments in the month leading up to October 9th, indicating the severity of the financial pressures. With the holiday season approaching, these difficulties are expected to intensify for those already struggling.

Concha suggests practical steps that essential businesses and the government can take to alleviate this burden. She recommends supermarkets make affordable budget range essentials available in convenience stores nationwide.

Additionally, with rising energy debt, Concha emphasises the urgent need for the government to outline plans for targeted energy support for the most vulnerable households this winter.

Which? is also calling on telecoms providers to cancel the planned above-inflation price hikes for 2024. Concha urges Ofcom to use its upcoming review to ban these unpredictable mid-contract price increases, providing consumers with certainty about the total cost of their contracts.

As the UK economy shows signs of recovery with falling inflation, the focus shifts to addressing the broader cost of living crisis.

The call for action by Which? underscores the need for targeted support to ensure that vulnerable households can navigate these challenging times.

TUC General Secretary Paul Nowak said: “The UK has the highest inflation in the G7. Bills and prices are sky high and still going up.

“While other countries have done more to reduce cost of living pressures, working families and businesses here remain seriously under the cosh.

“The Conservatives’ lack of a credible economic plan is costing us dear.

“An arbitrary inflation target is no cause for self-congratulation. Britain cannot afford the Tories.”