UK inflation has halved this year, but economic growth remains elusive

London
CNN
—

UK Inflation It fell to its lowest level in two years in October, allowing Prime Minister Rishi Sunak to declare victory He pledged to halve the rate of inflation this year.

But a chorus of commentators said businesses and households still face „worryingly” high bills and a sluggish economy, and Sunak’s other big promise – generating growth – remains a distant prospect.

Consumer prices rose 4.6% last month compared to a year earlier, up from 6.7% in September, according to the Office for National Statistics (ONS). said Wednesday. There was a recession Mostly driven by a steep drop in household energy bills, reflecting the lower wholesale price of natural gas.

Slower increases in food prices have also helped. Food inflation fell to its lowest level in more than a year, at 10.1% in October.

„We have met the priority I set in January and halved inflation,” Sunak wrote in a post. XThe site formerly known as Twitter.

„As many people continue to struggle, we need to stay on course to reverse inflation.”

But Gary Smith, general secretary of trade union GMP, said the inflation figures would come as a „chill” to people who were „struggling to take”.

„This morning’s celebration of an artificial goal from a government that has wrecked the economy and left millions with unaffordable bills is out of touch,” he added in a statement.

The independent Bank of England – which controls the main lever used to keep prices in check, namely interest rates – is targeting an inflation rate of just 2%, meaning inflation needs to fall a lot further.

The central bank has pushed interest rates to their highest level in more than 15 years in a long-running campaign to rein in rising prices. And earlier this month, Governor Andrew Bailey warned that inflation was still high.

Instead of focusing on the headline, many economists pointed to lingering underlying price pressures, including wage growth and the cost of services. Services inflation edged up to 6.6%, though it eased.

„The reality for consumers is that prices are still worryingly high,” said Alex Veitch, policy director at the British Chambers of Commerce.

Inflation eased from above 10% in January, Sunak’s second pledge to voters – to get the economy growing – seems increasingly inaccessible.

UK GDP record Zero growth In the July to September period, it fell by 0.2% compared to the previous quarter, according to the ONS.

„The UK economy is still facing stagnation and, in our view, the path forward will continue to be bumpy,” said Julian Lafarque, chief market strategist at Barclays Private Bank. Stagflation refers to the toxic combination of high inflation and low or no economic growth.

There is also evidence that higher interest rates put more pressure on the economy. Most of the United Kingdom saw a decline in business activity last month, „amid broader weakness in demand,” according to Goods and Services. NatWest survey Monitoring private sector production.

Meanwhile, UK business confidence fell to its lowest level in October this year, according to a separate report Census Businesses in the manufacturing and service sectors produced by Accenture and S&P Global.

„Concerns about the cost of living and higher interest rates are dampening the positive effects of moderate inflation,” Evan Mackay, Accenture’s head of strategy and consulting in the UK and Ireland, said on Monday.

UK Chancellor of the Exchequer Jeremy Hunt will present the government’s spending and tax plans in his interim budget next week. Veitch, of the British Chambers of Commerce, said the so-called autumn report was „an opportunity for the government to outline a clear strategy for growth”.