Inflation has fallen back to its slowest pace in four years thanks to steadying food prices and the fact that energy price hikes have yet to come in.
The consumer prices measure of inflation slowed to 2.1% in November from 2.2% in October and was the lowest since November 2009, according to the Office for National Statistics.
The move closer to the Bank of England's government-set target of 2% will give policymakers more headroom to leave interest rates at their record low. It will also ease the pressure on households that have been grappling with living costs rising at a faster pace than average wages for several years.
"The fall in UK CPI inflation from 2.2% to 2.1% in November confirms that the economy is enjoying a favourable mix of strong growth and low inflation," said Samuel Tombs at the thinktank Capital Economics.
"We continue to think that CPI inflation is likely to dip below the 2% target in 2014. As a result, even if earnings growth recovers only marginally next year, an end to the squeeze on real earnings is finally in sight."
November's inflation was just below forecasts for 2.2% in a Reuters poll of economists and the monthly rise in prices of 0.1% was below forecasts for 0.2%.
Economists said that recently announced price rises for household energy bills have yet to be counted and the rate of inflation could pick up again in the coming months. They noted that underlying inflationary pressures seem modest.
Separate ONS data showed factories' costs falling while the prices they charge rose at a slower pace than expected last month. The ONS measure of core inflation, which strips out volatile items such as energy and food, was 1.8% in November, up slightly from 1.7% in October.
Rob Wood, chief UK economist at Berenberg bank, said: "Pipeline pressures are subdued and the macro picture points to little pricing pressure. Unemployment is elevated and underemployment is rife … We expect [inflation] to fall to 1.9% by next summer.
The strong recovery should then push it back up a little above target (to 2.2%) by the end of 2015, as the labour market tightens." Against the backdrop of political tussling over the squeeze on living standards, the Treasury welcomed the fall in inflation.
A spokesman said: "Inflation has fallen to its lowest level in four years. The government's long-term economic plan is working. All parts of the economy are growing, the deficit is falling and jobs are being created.
But the job is not done and the government will go on taking the tough decisions needed to create a sustainable recovery for all."
Catherine McKinnell MP, Labour's shadow economic secretary to the Treasury, said: "This small fall in the inflation rate is welcome, but with prices still rising much faster than wages the cost-of-living crisis continues.
Families and pensioners are still set to face inflation-busting hikes in energy prices this winter." The main downward effect on inflation last month came from food and non-alcoholic drinks: fruit prices rose by less than a year ago, and vegetables prices fell compared with 2012 when bad weather had hit crops and pushed up prices.
The biggest upward pressure on inflation came from petrol prices, which fell by less than a year ago, and there was some effect from dearer computer games too.
Separately, the ONS published data on costs for manufacturers and what they are charging for their goods – so-called factory gate prices. Their input costs last month were down 1% on a year earlier. Factory gate inflation was 0.8%, just below forecasts of 0.9%.
theguardian.com
The consumer prices measure of inflation slowed to 2.1% in November from 2.2% in October and was the lowest since November 2009, according to the Office for National Statistics.
The move closer to the Bank of England's government-set target of 2% will give policymakers more headroom to leave interest rates at their record low. It will also ease the pressure on households that have been grappling with living costs rising at a faster pace than average wages for several years.
"The fall in UK CPI inflation from 2.2% to 2.1% in November confirms that the economy is enjoying a favourable mix of strong growth and low inflation," said Samuel Tombs at the thinktank Capital Economics.
"We continue to think that CPI inflation is likely to dip below the 2% target in 2014. As a result, even if earnings growth recovers only marginally next year, an end to the squeeze on real earnings is finally in sight."
November's inflation was just below forecasts for 2.2% in a Reuters poll of economists and the monthly rise in prices of 0.1% was below forecasts for 0.2%.
Economists said that recently announced price rises for household energy bills have yet to be counted and the rate of inflation could pick up again in the coming months. They noted that underlying inflationary pressures seem modest.
Separate ONS data showed factories' costs falling while the prices they charge rose at a slower pace than expected last month. The ONS measure of core inflation, which strips out volatile items such as energy and food, was 1.8% in November, up slightly from 1.7% in October.
Rob Wood, chief UK economist at Berenberg bank, said: "Pipeline pressures are subdued and the macro picture points to little pricing pressure. Unemployment is elevated and underemployment is rife … We expect [inflation] to fall to 1.9% by next summer.
The strong recovery should then push it back up a little above target (to 2.2%) by the end of 2015, as the labour market tightens." Against the backdrop of political tussling over the squeeze on living standards, the Treasury welcomed the fall in inflation.
A spokesman said: "Inflation has fallen to its lowest level in four years. The government's long-term economic plan is working. All parts of the economy are growing, the deficit is falling and jobs are being created.
But the job is not done and the government will go on taking the tough decisions needed to create a sustainable recovery for all."
Catherine McKinnell MP, Labour's shadow economic secretary to the Treasury, said: "This small fall in the inflation rate is welcome, but with prices still rising much faster than wages the cost-of-living crisis continues.
Families and pensioners are still set to face inflation-busting hikes in energy prices this winter." The main downward effect on inflation last month came from food and non-alcoholic drinks: fruit prices rose by less than a year ago, and vegetables prices fell compared with 2012 when bad weather had hit crops and pushed up prices.
The biggest upward pressure on inflation came from petrol prices, which fell by less than a year ago, and there was some effect from dearer computer games too.
Separately, the ONS published data on costs for manufacturers and what they are charging for their goods – so-called factory gate prices. Their input costs last month were down 1% on a year earlier. Factory gate inflation was 0.8%, just below forecasts of 0.9%.
theguardian.com
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