Thursday 18th April 2024

Some relief for hard-pressed households as inflation falls

Households will have felt a slight easing of price rises in the past month as inflation falls following the drop in fuel prices.

The latest update from the Office for National Statistics (ONS) showed a fall in inflation in August for the first time in a year.

The Consumer Price Index (CPI) rate of inflation slowed to 9.9% annually, down from 10.1%, mainly thanks to a drop in fuel prices.

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The CPI figures showed the fall in prices of motor fuels was the largest downward contribution to the figures, while most of the upward contribution was due to rising food and non-alcoholic beverages, along with housing and household services.

While the unexpected drop might provide some relief to households, inflation levels are still very high relative to recent years, and remain a significant problem for households in 2022.

What is happening to prices as inflation falls?

Households are experiencing the fastest increase in food prices since 2008. Food price inflation is as high as 13.1% currently, with significant increases in the price of milk, cheese and eggs in particular. Clothing and footwear prices rose despite end of summer sales too, up 7.6%.

Alongside fuel, consumer spending has notably fallen in transport, tourism and recreational activities, taking into account the effects of rail strikes. 

Analysts expect inflation to persist as energy bills continue to rise. However, while bills were expected to exceed £4,000 pounds annually by January, Government intervention has now promised to cap average bills at £2,500.

Personal inflation

Households are finding ways to navigate the crisis – from cutting food and transportation spending to making energy efficiency savings at home.

But not all households experience inflation in the same way, as each one has different things it spends money on. For example, not all households have cars, a big cost for many.

The ONS has an inflation calculator which shows consumers their relative cost-of-living changes in the past year.

It uses the Consumers Prices Index including owner occupier’s housing costs (CPIH) which it says is the most comprehensive measure of inflation.

The tool estimates the rise in the consumer’s monthly spend, shows previous year comparisons and breaks down which items contribute to the consumer’s cost-of-living more.

You can input their household spend on a range of categories such as groceries, housing, transport and leisure.

Try using the tool yourself and see what your personal rate of inflation is:

Photo by Markus Spiske on Unsplash

Richa Ved

Richa is a young Indian graduate from Warwick Business School, aspiring to find her niche in the media industry. She has a passion for writing and a keen interest in financial affairs. If you don’t find her working, she’s probably having a pizza (her favourite!) and a pint of beer somewhere.

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