U.K. Inflation Falls for Second Month, Following Global Move
The U.K.’s annual rate of inflation fell for a second straight month in December, the latest sign that the global surge in consumer prices that began in early 2021 is slowing.
Consumer prices in the U.K. were 10.5% higher than a year earlier, a slower rate of inflation than the 10.7% recorded in November as gasoline prices cooled, the Office for National Statistics said Wednesday. The core rate of inflation was unchanged at 6.3%, while prices of food and beverages rose at the fastest pace since September 1977.
Despite the fall in headline inflation, a jump in pay increases amid a wave of strikes by government workers means the Bank of England is likely to raise its key interest rate for the 10th time when its policy makers next meet in early February.
The decline in the U.K.’s inflation rate in December is part of what appears to be a global trend.
South Africa’s statistics agency on Wednesday said the annual rate of inflation in the continent’s second-largest economy fell to 7.2% in December from 7.4% in November. Figures released Tuesday showed the annual rate of inflation in Canada fell, while figures released Monday recorded a slowdown in the pace of price rises in India. That followed the release of U.S. figures that show inflation eased for the sixth straight month at the end of 2022, to 6.5% from 7.1%.
Across the Group of 20 largest economies, which make up about four-fifths of global economic output, the annual rate of inflation fell in November for the first month since August 2021. The declines recorded in Europe, the U.S. and elsewhere indicate that a wide measure of global inflation likely fell again in December.
“The baseline is for inflation to come down around the globe,” said
Gita Gopinath,
deputy managing director of the International Monetary Fund, during a Tuesday discussion at the World Economic Forum in Davos.
As in other parts of Europe, inflation surged in the U.K. in the months following Russia’s invasion of Ukraine last year, and Moscow’s decision to throttle natural gas supplies to Europe to undermine Western support for Kyiv.
But natural-gas prices have fallen sharply from their August peak as Europe secured liquefied natural gas to build supplies for a heating season that has proved milder than usual. As elsewhere in Europe, the U.K. government has provided financial support for households, and in particular, limited the rise in home energy prices since October.
“The biggest single reason that inflation has risen to that level is the war in Ukraine,” BOE Gov. Andrew Bailey told lawmakers Monday. “It is also the most likely reason that we are going to see a rapid fall in inflation in the year ahead. We aren’t seeing energy prices rising further—in fact, they are coming down.”
However, prices for food in particular are set to stay much higher than they were before the surge in inflation, while prices of services and many goods are likely to continue to rise during 2023.
“We are certainly nowhere close to peak prices,” said
Alan Jope,
chief executive at consumer goods company
Unilever.
“Most households in Europe are going to feel the squeeze.”
In addition to high energy prices, the central bank worries that a shortage of workers will keep wage rises and inflation rates high. The U.K. has been hit by a wave of strikes by government workers seeking pay rises that come close to matching inflation, with nurses staging limited walkouts Wednesday and Thursday. According to the ONS, 467,000 working days were lost to strikes in November, the highest number since the same month of 2011.
But pay has risen faster for workers in the private sector. Their wages were 7.2% higher than a year earlier, while government workers saw an increase of just 3.3%.
In contrast to most other economies, the number of workers in the U.K. has yet to return to prepandemic levels, leading to widespread shortages.
“I think that, going forward, the major risk to inflation coming down in the way that I think it will is the supply side, and in this country, particularly the question of the shrinkage of the labor force,” Mr. Bailey told lawmakers.
The BOE has signaled that it is likely to increase its key interest rate when policy makers meet on Feb. 2, when it will also publish new forecasts for economic growth and inflation that will point to the likely peak in borrowing costs.
Write to Paul Hannon at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
The U.K.’s annual rate of inflation fell for a second straight month in December, the latest sign that the global surge in consumer prices that began in early 2021 is slowing.
Consumer prices in the U.K. were 10.5% higher than a year earlier, a slower rate of inflation than the 10.7% recorded in November as gasoline prices cooled, the Office for National Statistics said Wednesday. The core rate of inflation was unchanged at 6.3%, while prices of food and beverages rose at the fastest pace since September 1977.
Despite the fall in headline inflation, a jump in pay increases amid a wave of strikes by government workers means the Bank of England is likely to raise its key interest rate for the 10th time when its policy makers next meet in early February.
The decline in the U.K.’s inflation rate in December is part of what appears to be a global trend.
South Africa’s statistics agency on Wednesday said the annual rate of inflation in the continent’s second-largest economy fell to 7.2% in December from 7.4% in November. Figures released Tuesday showed the annual rate of inflation in Canada fell, while figures released Monday recorded a slowdown in the pace of price rises in India. That followed the release of U.S. figures that show inflation eased for the sixth straight month at the end of 2022, to 6.5% from 7.1%.
Across the Group of 20 largest economies, which make up about four-fifths of global economic output, the annual rate of inflation fell in November for the first month since August 2021. The declines recorded in Europe, the U.S. and elsewhere indicate that a wide measure of global inflation likely fell again in December.
“The baseline is for inflation to come down around the globe,” said
Gita Gopinath,
deputy managing director of the International Monetary Fund, during a Tuesday discussion at the World Economic Forum in Davos.
As in other parts of Europe, inflation surged in the U.K. in the months following Russia’s invasion of Ukraine last year, and Moscow’s decision to throttle natural gas supplies to Europe to undermine Western support for Kyiv.
But natural-gas prices have fallen sharply from their August peak as Europe secured liquefied natural gas to build supplies for a heating season that has proved milder than usual. As elsewhere in Europe, the U.K. government has provided financial support for households, and in particular, limited the rise in home energy prices since October.
“The biggest single reason that inflation has risen to that level is the war in Ukraine,” BOE Gov. Andrew Bailey told lawmakers Monday. “It is also the most likely reason that we are going to see a rapid fall in inflation in the year ahead. We aren’t seeing energy prices rising further—in fact, they are coming down.”
However, prices for food in particular are set to stay much higher than they were before the surge in inflation, while prices of services and many goods are likely to continue to rise during 2023.
“We are certainly nowhere close to peak prices,” said
Alan Jope,
chief executive at consumer goods company
Unilever.
“Most households in Europe are going to feel the squeeze.”
In addition to high energy prices, the central bank worries that a shortage of workers will keep wage rises and inflation rates high. The U.K. has been hit by a wave of strikes by government workers seeking pay rises that come close to matching inflation, with nurses staging limited walkouts Wednesday and Thursday. According to the ONS, 467,000 working days were lost to strikes in November, the highest number since the same month of 2011.
But pay has risen faster for workers in the private sector. Their wages were 7.2% higher than a year earlier, while government workers saw an increase of just 3.3%.
In contrast to most other economies, the number of workers in the U.K. has yet to return to prepandemic levels, leading to widespread shortages.
“I think that, going forward, the major risk to inflation coming down in the way that I think it will is the supply side, and in this country, particularly the question of the shrinkage of the labor force,” Mr. Bailey told lawmakers.
The BOE has signaled that it is likely to increase its key interest rate when policy makers meet on Feb. 2, when it will also publish new forecasts for economic growth and inflation that will point to the likely peak in borrowing costs.
Write to Paul Hannon at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
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