Inflation in the UK dropped to 6.8% in the year to July as gas and electricity prices lowered, but wages still lag behind.
The latest figures from the Office for National Statistics showed the consumer prices index (CPI) rate of inflation had dropped from 7.9% in June.
The consumer prices index including housing costs (CPIH) rose by 6.4% in the 12 months to July, the same rate as the 12 months to June 2023.
Inflation and pay
Despite the downward trend, workers’ pay will struggle to cover some expenses. The cost of eating out increased, as did flight prices, which jumped almost 30% compared to the same time last year.
Food costs also continue to be more than they were a year ago, up 15% compared to July 2022.
Yesterday (15 August) the ONS revealed record pay growth of 7.8%, and growth in total pay including bonuses of 8.2%.
However, when adjusted for inflation using the CPIH measure, total pay in April to June 2023 only rose by 0.5%, and regular pay by just 0.1%.
Dr George Dibb, head of the Centre for Economic Justice at the IPPR think tank, said that while lower inflation was good news, a looking recession could overtake price rises as the main economic concern.
“Other countries have brought inflation under control quicker than in the UK, with more support for households and workers avoiding unnecessary pain,” he said.
“Interest rate hikes take up to a year and a half to fully filter through to the economy. One year from now, ‘pass the parcel inflation’ might be over, but further interest rates might also have killed the recovery – there are already signs of falling consumer confidence and rising unemployment.”
“Even today it’s important to note that while inflation might be falling, prices are not. Households are still struggling with high prices, especially those on the lowest incomes. By supporting households and businesses with energy costs, making businesses play their part, and supporting renters, countries like Spain have shown that inflation can be brought down without the economy going into tailspin.”
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