### Summary
The UK is experiencing mixed economic news, with wage increases, falling inflation, and lower food prices, but core inflation remains high. The Bank of England is expected to raise interest rates in September. Meanwhile, the government is providing support payments to eligible households, and usual state benefits will be paid in September. The Energy Price Guarantee has expired, and consumers will now pay the Energy Price Cap rate, which has decreased but is still higher than pre-pandemic levels.
### Facts
- 💰 The UK saw wage increases, falling inflation (excluding volatile food and energy prices), and lower food prices in mid-August.
- 💸 Core inflation remains high at 6.9%, indicating that any economic gains may be offset by higher borrowing costs.
- 🏦 The Bank of England is likely to raise interest rates from 5.25% to 5.5% in September to address high inflation.
- 💷 The government is providing support payments to eligible households, including means-tested benefits claimants, people with disabilities, and pensioners.
- 💳 Usual state benefits and pension payments will be delivered as normal in September with no bank holidays.
- 💡 The Energy Price Guarantee has expired, and consumers will now pay the Energy Price Cap rate, which has decreased to £2,074 for Q3 2023.
- ⬇️ Wholesale energy prices have dropped, leading consultancy firm Cornwall Insight to predict further decreases in October. However, prices are expected to remain above pre-pandemic levels for the foreseeable future due to geopolitical incidents and the UK's reliance on energy imports.
Prices in British shops have risen at their slowest rate since October, with a 6.9% increase in the year to August, due to rising costs of meat, potatoes, and cooking oil, as well as a reduction in grain exports from Ukraine and export restrictions on rice from India, according to the British Retail Consortium.
Global prices for staple foodstuffs have reached a two-year low in August, driven by declines in dairy products, vegetable oils, meat, and cereals, while sugar and rice prices have increased due to export restrictions and extreme weather conditions.
British grocery inflation fell to its lowest level in a year in September, with prices rising fastest in products such as eggs, sugar confectionery, and frozen potato products, providing some relief for consumers and the government.
Grocery bill prices remained stable in August, with a 0.2% increase in consumer prices at supermarkets, according to the Bureau of Labor Statistics, but food prices at home rose by 3.0% compared to last year.
Inflation in the UK fell to 6.7% in August, the lowest level in a year-and-a-half, driven by slower food price increases and a drop in hotel and air fare costs, although fuel prices rose; economists had expected the figure to increase due to rising fuel prices.
Supermarket competition in the UK has led to the first monthly drop in food prices in over two years, with prices down 0.1% in September, according to the British Retail Consortium (BRC). The BRC also reported that grocery inflation fell to 9.9% in September, down from 11.5% in August, while overall shop price inflation decreased to 6.2%. Although prices are still rising, the rate of inflation is slowing, providing some relief for households. However, the BRC warned of potential risks such as high interest rates, climbing oil prices, and supply chain disruption.
UK grocery price inflation has reached its lowest rate in over a year, with the price of butter dropping by 16p compared to last year, according to Kantar, although prices for items such as eggs, sugar confectionery, and frozen potato products are still on the rise.
The Consumer Price Index rose 3.7% for the 12 months ended in September, with high gas prices and shelter costs contributing to inflation, although food prices matched overall inflation for the first time since early 2022, and underlying inflation trends are moving in the desired direction of the Federal Reserve.
Food prices fell in September for the first time in two years, but fuel prices increased sharply, resulting in an overall inflation rate of 6.7%; however, wages outpaced inflation for the first time in almost two years, alleviating some financial pressure for households.
Retail sales across Great Britain have fallen by more than expected, with volumes dropping by 0.9% in September, suggesting a drop in consumer confidence and a possible recession in the retail sector. Factors such as cost-of-living pressures and warm weather affecting sales of autumn clothing contributed to the decline.
Retail sales in the UK fell more than expected in September due to unseasonably warm weather and cost-of-living pressures, with clothing stores seeing a notable decline in sales of colder weather gear, while food sales increased slightly.
British retail sales fell by 0.9% in September, raising concerns that the retail industry has entered a recession before the crucial festive shopping season, as consumers cut back on spending due to mild weather conditions and rising inflation.
Food inflation continues to rise, with a 5.9% increase in the cost of food in September, highlighting the struggle of rising prices and the need to make hard choices at the grocery store.
