The ONS has introduced this morning that for the 12 months to October, UK inflation has fallen sharply, to its lowest ranges for 2 years – at 4.6% – even decrease than specialists had been anticipating. Good information certainly.
Largely pushed by a fall in vitality prices, in comparison with final month’s inflation fee of 6.7% this reinforces the view that the path of journey for inflation is continuous downwards. But, costs are nonetheless rising. So, what does it imply for customers battling the cost of dwelling disaster, for businesses and for advisers trying to assist purchasers take advantage of acceptable monetary selections for the long run? And what does it imply for the Bank of England forward of its subsequent rate of interest resolution?
Finance specialists have been sharing their response to right this moment’s constructive inflation knowledge as follows:
Lindsay James, funding strategist at Quilter Investors: “The Prime Minister can be respiratory a deep sigh of reduction right this moment, particularly given the political occasions of the previous few days. Halving inflation was meant to be the simplest of his 5 priorities to realize because it was a 12 months on 12 months comparability, and 2022 noticed inflation rise sharply. Although issues obtained just a little shut for consolation, right this moment’s sharp drop in inflation to 4.6% is a constructive step on the lengthy highway again to focus on ranges. However, this has been predominantly pushed by components that look unlikely to be repeated within the months forward.
“Energy costs are essentially the most important contributor to the autumn, with fuel prices highlighted as 31% decrease within the 12 months to October 2023, and electrical energy prices down 15.6%. Unfortunately the lack of £400 of help from the federal government per family in direction of vitality payments makes the true influence on customers ‘cost of living’ much more modest, while fuel costs have not too long ago moved greater, reflecting international provide constraints, which is able to feed into the next Energy Price Cap from January onwards.
“Food seems to be seeing extra constant reductions, with this the seventh month of falling annual inflation readings, supported by a pattern of falling costs for domestically produced meals, elevated competitors amongst the supermarkets, and usually decrease smooth commodity costs.
Whilst this headline knowledge will on the face of or not it’s welcome information for the MPC, they are going to wish to see extra proof of slowing inflation throughout the financial system, fairly than it coming primarily from fluctuations in worldwide vitality markets. With Core CPI (excluding vitality, meals, alcohol and tobacco) falling extra regularly, now at 5.7% and down from 6.1% in September, it’s clear that additional progress in direction of the goal of two% is prone to be comparatively gradual.”
Danni Hewson, head of monetary evaluation at AJ Bell, feedback: “Whilst we’re not speaking about deflation, the truth is many costs are nonetheless rising considerably, this fall within the headline fee of inflation can be psychologically essential.
“Not solely has CPI are available in below 5% however it’s reached a two-year low and the quantity launched this morning was cooler than had been anticipated.
“This time final 12 months households had been enduring the worst influence of the cost-of-living disaster. Energy payments had shot up, even with the federal government’s value cap, and the cost of maintaining the lights on was inflicting an enormous quantity of misery for a lot of businesses and people.
“This October falling vitality prices are primarily accountable for this fall within the headline fee. But keep in mind while payments have come down households aren’t getting these month-to-month funds which helped to offset the worst influence of these hikes final 12 months. Food inflation continues to be in double digits and while many individuals are actually feeling the good thing about actual time period wage will increase budgets are nonetheless tight and any financial savings are prone to be lengthy gone.
“It’s essential to not get swept up within the wave of optimism and neglect these individuals on the bottom incomes for whom the final couple of years have been debilitating. But for owners with a set fee mortgage because of come to an finish within the subsequent twelve months, right this moment will carry reduction.
“Market expectation that we’ve reached peak rates of interest has solidified right this moment and solely three % assume the Bank of England will hike charges when it meets subsequent month. Forty % anticipate charges will begin to fall in May subsequent 12 months, getting as little as 4.25% by the top of the 12 months, and that expectation has already begun to filter via to lenders.
“Consumer confidence, households with a bit more money in their pockets and a sense of optimism about the future are all massively important things for business, for jobs and for growth, so today’s figures will likely leave many with a distinctly warmer feeling than in recent months.”
George Lagarias, Chief Economist at Mazars feedback: “CPI receding at manageable levels probably puts the nail on the coffin of this rate hike cycle. We could begin to see the end for this inflation wave, especially if we don’t experience higher energy prices in the next few months. Lower inflation is consistent with the sluggish consumption data of the past two months. As such, one questions still looms large: will the economy that has succeeded in bringing inflation down to more manageable levels, also achieve to keep growth above the recession line?”
Andrew Gething, managing director of MorganAsh, stated: “Given that inflation has remained unchanged for the previous couple of months, it’s actually constructive to see it return to its downward trajectory – and by fairly some margin too. It is now at its lowest stage for 2 years, thanks principally to the decrease Ofgem vitality value cap. A stabilisation of meals inflation can be welcome information for a lot of, though households proceed to face stress on the petrol pump.
“While the federal government can be completely happy to have met its finish of 12 months goal to halve inflation, we mustn’t lose sight of the truth that we’re nonetheless a manner off from the illusive 2% goal. There’s no query that pressures stay, significantly for essentially the most vulnerable of households. We should additionally take into account the elevated burden for these nonetheless set to remortgage within the close to future onto a a lot greater fee.
“As is such, it’s extremely worrying to listen to that companies are nonetheless reporting few and even no vulnerable purchasers, although everyone seems to be vulnerable in some unspecified time in the future of their lives. It’s for that reason, wealth administration and stockbroking companies discovered themselves within the crosshairs of the FCA in its most recent Dear CEO letter. Identifying these dealing with difficultly merely isn’t potential with no sturdy and constant strategy to assessing and monitoring client vulnerability. Even as inflation improves, this should be a precedence for all companies throughout monetary companies.
“Although a reduction in the base rate still feels some way off, it is hopeful that today’s news will influence the Bank of England to hold rates once again when the MPC meets next month. However, we must heed the warning that further rises are certainly not off the table, especially if the economy experiences any severe shocks.”
Melanie Baker, senior economist at Royal London Asset Management, stated: “Although Q3 Gross Domestic Product (GDP) was a contact stronger than anticipated, the main points had been downbeat with falls in client spending and business funding. The contribution to development from internet commerce seems to be to have been way more constructive than anticipated, however partly on the again of falling imports. That itself will seemingly partly replicate weak spot in home demand.
“Looking on the month-to-month figures, it seems to color a extra constructive story, with development in September barely stronger than in August. However, much less industrial motion within the well being service, and hotter than common temperatures, seem to have performed some position and the broader run of information nonetheless suggests that is an financial system that has grown little since early 2022.
“The UK continues to keep away from going right into a technical recession, which would wish two consecutive quarters of unfavourable development, although it clearly wouldn’t take a lot of a again revision for Q3 GDP to have fallen. The Purchasing Managers’ Index (PMI) business surveys proceed to look in keeping with modestly falling personal sector output. If the UK continues to see little to no development, the expertise of the financial system, together with the roles market, is probably not very completely different than it could have been had the UK skilled quick, gentle recession.
“This release is likely to have little net effect on the Bank of England’s thinking. According to its recently published November Monetary Policy Report, it was expecting flat GDP in Q3 and 0.1% in Q4.”
Steven Cameron, Pensions Director at Aegon, stated: “Today’s official inflation determine of 4.6%% from the Office for National Statistics reveals the Government has delivered on its promise to halve inflation from its 10.7% place to begin by the 12 months finish.
“It comes a day after figures present complete earnings proceed to extend at a fee of seven.9%. While this ‘real’ earnings development of over 3% is sweet information for these of working age receiving common pay will increase, it piles stress on the Government because it weighs whether or not or to not honour the triple lock in full subsequent April, with an announcement presumably made as a part of the Chancellor’s Autumn Statement.
“The official components would grant an 8.5% improve, based mostly on year-on-year earnings development for the May to July interval. This is additional above inflation than we’ve seen in recent months. With rumours of the Chancellor having extra fiscal headroom than anticipated, the Government might resolve to grant the complete 8.5%, offering one other bumper improve after this April’s highest ever 10.1%. But that is paid for out of the National Insurance of right this moment’s employees and raises actual questions round intergenerational equity.
“There have been reviews that the Government is contemplating adjusting the earnings development determine downwards to take out the influence of recent one-off public sector bonuses which have created a ‘distortion’. While trimming it again to say 7.8% would save the Government a whole lot of tens of millions, it dangers the wrath of the pensioner inhabitants forward of an almost sure General Election subsequent 12 months.
“An 8.5% improve would see the New State Pension bounce by a bumper £901.02 to £11,501.22 a 12 months. The ‘old’ State Pension, for individuals who reached State Pension age earlier than 6 April 2016, would additionally rise by £690.40 to £8,812.80.
“With the Government already having greater than met its goal of chopping inflation by half by the top of the 12 months, the present 4.6% stays considerably above the Bank of England’s 2% goal, so the headline fee might fall even additional as we head into the early months of 2024. This means there’s an actual probability {that a} State Pension improve of 8.5% may very well be greater than double the ruling fee of inflation come subsequent April. That’s unsustainable.
“Whatever the decision for next April, volatile price inflation and earnings growth add to growing concerns that the Triple Lock in its current form is unsustainable longer term. Prior to the General Election, we’re calling on the main parties to make clear their proposals to make it sustainable, reliable, and intergenerationally fair.”
Hetal Mehta, Head of Economic Research at St. James’s Place, stated: “While today’s inflation drop to below 5% will be hailed as a major milestone in the progress to 2%, the UK remains one of the highest inflation economies. Core inflation is still stubbornly sticky at 5.7%. The next phase of inflation reduction will almost certainly be more painful for the economy as the easy wins on energy after largely behind us.”
Jonny Black, Chief Commercial and Strategy Officer at abrdn, Adviser, stated: “While inflation easing to 4.6% is sweet information, the journey thus far has been gradual and regular.
“Inflation-proofing earnings stays essential for purchasers, they usually’ll worth their advisers’ assist in reviewing their methods and understanding the place value rises might go subsequent.
“This could be influenced by any changes to savings and investing policy announced by the Chancellor in next week’s Autumn Statement. With areas like ISAs rumoured to be under consideration, this will be something closely watched by advisers and their clients alike. Big changes could have big implications for long-term planning.”
Andy Mielczarek, Founder and CEO of SmartSave, a Chetwood Financial firm, stated: “Any drop in the rate of inflation is welcome news, and many Britons might be feeling a sense of relief that the worst of the cost-of-living crisis could finally be behind us.
“As consumers feel the pinch on their budgets loosen, they should take advantage of the opportunity to consider revamping their savings strategy. In particular, those holding significant sums in easy-access high-street savings accounts, many of which continue to offer paltry rates, could end up missing out on better returns in the months to come.
“The onus is on savers to search carefully for the right product and provider. For instance, as inflation continues to fall, those feeling more confident about setting money aside in a fixed-term savings account are likely to achieve better returns than those in easy-access or current accounts. And looking beyond the high street remains crucial when shopping around for the most competitive rates.”
Lily Megson, Policy Director at My Pension Expert, stated: “While Rishi Sunak may pat himself on the back for nearing his target of halving inflation to 5%, the reality is that households continue to grapple with serious economic challenges. Ultimately, the cost of living is still rising, which throws into question how people are able to spend, save and invest their hard-earned money.
“There’s a pressing need for more robust support for those approaching or in retirement. If not, we will continue to see the worrying trend of people in their 50s, 60s and 70s either delaying their retirement, or unretiring to top up their pension pots.
“We have to hope that next week’s Autumn Statement provides clear, decisive actions to address the financial concerns of pension planners across the UK, and improving access to regulated, affordable advice must be central to this. Knowledge is power, and providing better access to advice will empower consumers to navigate the economic landscape far more effectively.”
Mohsin Rashid, CEO of ZIPZERO, stated: “A notable fall in inflation, and particularly energy prices, is great news. But as another unavoidable expense, rising food prices remains a major concern. Something must be done.
“It would be nothing short of a miracle if predictions that food price inflation will be mostly gone by Easter are realised. And even if this comes to pass, that still leaves six months in which millions of households will continue to afford their weekly shop, entirely dependent on tight budgeting, shopping for deals, and squeezing every penny they can from promotions and rewards.
“Supermarkets have made some progress in pushing special offers to their loyalty card members, but their profit margins show there is still far, far more they could be doing. I urge them to do everything in their power to make life easier for households and ensure that today’s encouraging inflation news is the first step on the path to recovery.”
Jatin Ondhia, CEO of Shojin, stated: “November is shaping as much as be a major month, with inflation falling, a new-look cupboard, and an incoming Autumn Statement — this can be a pivotal second for individuals to reassess how they’re managing their finance and take into account easy methods to greatest supercharge their financial savings and investments.
“Even as inflation falls, investors cannot afford to be passive; in this environment, it is important to scrutinise your portfolio and explore every available option, considering both traditional and alternative assets.
“The political and economic landscape has shifted once again this past month, and investors’ risk tolerance and long-term financial goals may need to recalibrate too. What’s more, all eyes will now turn to Jeremy Hunt and next week’s Autumn Statement. Falling inflation is a boost to the Chancellor, and it will be intriguing to see what he pulls out the famous red briefcase in the way of impactful policies aimed at fostering growth and galvanising the investment landscape – investors will certainly need to take note.”
Richard Berry, founding father of GoodMoneyGuide.com, says: “These better-than-expected inflation figures are a trigger for hope for households, however it’s too early to be celebrating.
“Energy costs have performed a significant position in bringing inflation down, with the prices of electrical energy and fuel falling by greater than a fifth in comparison with this time final 12 months.
“Tensions across the Israel-Gaza battle and the continued conflict in Ukraine imply that vitality prices are already predicted to be greater in 2024, and it wouldn’t take a lot for the Middle East tinderbox to ignite and push prices via the roof once more.
“All eyes will now flip to the Bank of England, which has a troublesome resolution to make on rates of interest.
“After months of punishing will increase which have seen mortgage costs rocket, the Bank doubtlessly has the latitude to carry charges down, however it’s not a transfer that home-owners ought to hold their hat on.
“The cost-of-living crisis has left every Briton poorer as the prices of everyday items have gone through the roof, and today’s news could be the light at the end of the tunnel.”
