UK Inflation Drops to 15-Month Low

Facts

• According to the Office for National Statistics(ONS), annual inflation in the year to July fell to 6.8%, down from 7.9% in June. However, despite falling from a recent peak of 11.1% in October 2022, core inflation — which excludes food and energy prices — remained unchanged from June's rate of 6.9%.¹
• The drop means the Consumer Price Index (CPI) has reached its lowest point since February 2022. The figure has been credited to a fall in average annual household energy bills from the capped rate of £2,500 to £2,074.²
• Deputy director of prices at the ONS Matthew Corder stated that, while high food prices had eased slightly, the "falling cost of goods [has been] offset by higher service prices.”³
• The fall in monthly gas prices — of 25.2% between June and July this year — was the largest drop since the ONS began recording data in 1988. Despite this, inflation in services hit a 30-year record of 7.4%.⁴
• In response to the news, UK Prime Minister Rishi Sunak said the data showed Downing Street's economic strategy was "working," as treasury minister John Glen claimed the government was on course to reach its 2% inflation target by 2025.⁵
• However, Labour MP and shadow chancellor Rachel Reeves argued that, despite July's inflationary fall, the British public were still "worse off" following "13 years of economic chaos and incompetence."⁶

Sources: ¹BBC News, ²Evening Standard, ³Independent, ⁴Sky News, ⁵CityAM, and ⁶Guardian.

Narratives

• Pro-establishment narrative, as provided by Evening Standard. Inflation is falling, but it is still too soon to claim victory over the spiraling cost of living. The news is certainly welcome and will help the public will be further reassured of the competence of the government and the Bank of England. Though economists are waiting it out for additional good news in the following months, there are signs the current crisis is coming to an end.
• Establishment-critical narrative, as provided by The i. A decrease in inflation is more than welcome, however the current economic crisis has exposed the deeply inadequate economic strategies of the Bank of England and the Conservative government. Unless tactics change, the UK — still the worst performing economy in the G7 — will be hit by a recession in the future. Without reform, the UK will continue to be stung by failing businesses, high unemployment, and falling demand, in short, the recipe for an even larger economic crisis.

Predictions