Economy: Inflation retreats further from its peak to 4.8%

The Consumer Prices Index (CPI) rate of inflation fell to 4.8% in November, the Office for National Statistics (ONS) said, compared with 5% the previous month.

A 1p per litre fall in the cost of petrol between October and November helped ease the burden on consumers who were hit by 1.8p rise in the corresponding period a year ago.

And the cost of food and non-alcoholic drinks rose at its lowest rate since July 2010 after supermarkets launched aggressive price wars.

Last month’s mild weather prompted also retailers to put on promotions on winter clothes to drum up trade, with coats and jumpers seeing falls in prices.

However, an increase in prices from big six energy supplier EDF kept up the pressure on consumers, who are still struggling to cope with average wage growth far below the rate of inflation.

The cost of alcohol and tobacco also saw a record rise for an October to November period, mainly driven by higher red wine prices.

Inflation peaked at a three-year high of 5.2% in September and the Bank of England expects it to fall back to its 2% target over the next two years.

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Vicky Redwood, chief UK economist at Capital Economics, said: “November’s UK inflation figures provide further hope that inflation has now passed its peak and could soon fall pretty sharply.

“The fall in the headline CPI rate from 5.0% to 4.8% was in line with the consensus forecast but a bigger fall than we expected.

“We had cautiously pencilled in a rebound in food price inflation after October’s sharp fall but in fact it dropped further from 4.6% to 3.7%, suggesting supermarkets are still failing to pass on fully past rises in agricultural prices”

However, she added: “There is still a lingering risk that inflation picks up again in December, but come January – when the VAT rise drops out – it should start to fall like a stone. We still think that inflation will be below its target by the autumn, before dropping to 1% or lower.