Britain’s two-year cost of living crisis eased last month as cheaper petrol and less expensive food helped send the annual inflation rate sharply lower to 3.9% – its second big monthly fall in succession.
In a much bigger decline than had been anticipated by economists, the annual rate of price rises fell from 4.6% in October to its lowest level since September 2021.
The Office for National Statistics (ONS) said cheaper fuel was the main reason for the dip in the headline rate below 4% in November, with the average price of petrol falling by four pence a litre month on month.
The ONS said food prices were also rising more slowly than a year ago, singling out bread and cakes, which fell in price compared with the previous month. However, overall food prices rose by 0.3% month on month and are still up annually – by 9.2%, compared with a 10.1% rate in October.
The ONS also pointed out that the cost of food and non-alcoholic beverages had risen by about 27% in the past two years, compared with an increase of about 9% between November 2011 and November 2021.
Although the 3.9% figure remains at almost double the government’s 2% target, the latest fall means Rishi Sunak can say he has met his target of halving inflation in the course of 2023.
City forecasters had not expected a repeat of October’s sharp drop in inflation from 6.7%, and had pencilled in a decline to 4.4% in November. Core inflation – which strips out fuel, food, alcohol and tobacco – also fell sharply last month, dropping from 5.7% to 5.1%.
The chancellor, Jeremy Hunt, said: “With inflation more than halved we are starting to remove inflationary pressures from the economy. But many families are still struggling with high prices so we will continue to prioritise measures that help with cost of living pressures.”
The ONS chief economist, Grant Fitzner, said: “Inflation eased again to its lowest annual rate for over two years, but prices remain substantially above what they were before the invasion of Ukraine.
“The biggest driver for this month’s fall was a decrease in fuel prices after an increase at the same time last year. Food prices also pulled down inflation, as they rose much more slowly than this time last year.
“There was also a price drop for a range of household goods and the cost of secondhand cars.”
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Despite coming down from a peak of 11.1% in October 2022, the Bank of England has said the inflation rate is still too high for it to contemplate cutting interest rates. Threadneedle Street’s monetary policy committee responded to the highest inflation in four decades by raising the cost of borrowing at 14 successive meetings between December 2021 and August this year.
Ashley Webb, UK economist at the consultancy Capital Economics, said the bigger-than-anticipated drop in inflation would fuel speculation in the financial markets that the Bank would start cutting interest rates in May next year.
“The most striking thing about these data was the sharp easing in domestic inflationary pressures. Some of the decline in core inflation from 5.7% in October to 5.1% in November was due to the global influence of core goods inflation, which slowed from 4.3% to 3.3%.
“But some of it was due to services inflation falling from 6.6% to 6.3%, which left it well below the 6.9% rate the Bank had projected at the time of its November monetary policy report.”
The shadow chancellor, Rachel Reeves, said: “The fall in inflation will come as a relief to families. However, after 13 years of economic failure under the Conservatives, working people are still worse off.
“Prices are still going up in the shops, household bills are rising, and more than a million people face higher mortgage payments next year.”