UK economy: inflation eases slightly to 10.5% as fuel costs fall - but food prices hit 45-year high

UK inflation eased back further last month but costs still remained high for households as food prices hit another 45-year high, official figures show.

The Office for National Statistics (ONS) said the rate of Consumer Prices Index (CPI) inflation fell to 10.5% in December - down from 10.7% in November - suggesting that the cost-of-living crisis may have now passed its peak.

A steep fall in fuel costs was largely behind the decline in inflation, with ONS data showing annual fuel price inflation dropped back sharply to 11.5% in December from 17.2% in November.

Average petrol and diesel prices are now back to the levels seen in February last year, standing at 155.3 and 179.1 pence per litre respectively in December, according to the ONS.

Clothing and footwear also helped bring inflation down again in December, with prices rising by 6.5%, down from 7.5% in November, but food and drink inflation soared once again to 16.8% in December - up from 16.4% in November - marking the highest level since September 1977.

Prices also rocketed across restaurants, cafes and hotels as hospitality firms were forced to pass on their own surging costs, with inflation across this sector jumping to 11.3% in December – the highest level for more than 31 years.

Grant Fitzner, chief economist at the ONS, said: “Inflation eased slightly in December, although still at a very high level, with overall prices rising strongly during the last year as a whole. Prices at the pump fell notably in December, with the cost of clothing also dropping back slightly.”

He added: “Food costs continue to spike, with prices also rising in shops, cafes and restaurants.”

The latest figures is a sign that the UK may have seen the worst of inflation, with the number down from the 41-year high of 11.1% seen in October last year, when soaring energy bills pushed up the cost of living.

Government pledges to half inflation by end of year

CPI is expected to fall throughout this year as the cost crisis takes its toll on the economy, and the government has pledged to help halve inflation by the end of 2023.

Chancellor Jeremy Hunt said: “High inflation is a nightmare for family budgets, destroys business investment and leads to strike action, so however tough, we need to stick to our plan to bring it down.

“While any fall in inflation is welcome, we have a plan to go further and halve inflation this year, reduce debt and grow the economy – but it is vital that we take the difficult decisions needed and see the plan through.

“To help families in the meantime, we are providing an average of £3,500 of support for every household over this year and next.”

Hunt added that there could be no deviation from the government’s goal of halving inflation and claimed that getting inflation down would address the anger of public sector workers who are pushing for higher wages to ease the cost-of-living burden.

He said: “There is no room for any deviation from our central objective of the year, which is to halve inflation, so that we deal with, for example, the anger of public sector workers who are seeing their pay eroded, we deal with the pressure that pensioners are seeing when they are doing their weekly shop, the pressure on businesses worried sometimes about their viability.

“This has to be our central mission and that’s why the Prime Minister has nailed his colours to the mast and said we are going to halve inflation over the next year.”

Meanwhile, Labour has hit out at the government’s economic policies and said inflation was still five times the Bank of England target of 2%.

Shadow chancellor Rachel Reeves said: ““Each passing day brings more and more evidence that people are feeling worse off under the Tories. That such a huge proportion of household bills will be spent on energy instead of the things families enjoy is a mark of Tory failure on energy security and economic competence.

“This Tory government’s dearth of ambition for Britain is appalling. After 13 years of failure, they may only want our economy survive, but Labour wants it to thrive. As the party of sound money, Labour will make our economy stronger, and with our Green Prosperity Plan and mission to make Britain the best place to start and grow a business, we will get it growing again.”