The ONS said the UK inflation fall was mostly due to energy prices not rising as they did in July 2022, but the cost of living remains high
UK inflation fell from 7.9% to 6.8% in the year to July, according to the Office of National Statistics (ONS).
However, “core inflation” stayed at 6.9%, meaning prices are not coming down but rising less quickly. Whilst wages are rising, the cost of living has stayed high, meaning households are still facing considerable pressures.
Today’s big fall means that the UK is looking a bit less of an outlier – but still has the highest inflation in the G7. pic.twitter.com/QRZiq57g9R
— JamesSmithRF (@JamesSmithRF) August 16, 2023
House prices dropped in tandem with UK inflation fall
In light of this, Group chairman of Cornerstone Tax International, David Hannah, commented on the recorded fall in inflation and its impact on the property market:
“The reported fall in inflation today is a positive step in the right direction. Coupled with the fact that wages have once again risen, it may mean that the future will not look as bleak as many expected at the start of the year. So far, the government’s aim to cut inflation is working, yet they have some way to go if they want to get it back down to 2%.
“Concerningly, factors such as the unchanged rate of core inflation on goods and services mean that the average household is still experiencing enormous pressure.
“Interestingly, with wages up and inflation falling, we have also seen house prices fall by 0.3% in July, and subsequently, three of the UK’s largest mortgage lenders have slashed interest rates on their mortgages.
“Despite the fall in inflation, many are still expecting another Bank of England rate rise next month, which I feel would only serve to add to the already insurmountable pressure on homeowners.”
A recession could still be on the cards, warned the IPPR thinktank
Dr George Dibb, head of IPPR’s Centre for Economic Justice, commented: “It’s good news that headline inflation is lower, especially with energy bills coming down, but there is a very real risk that a recession may soon overtake price rises as the main economic concern.
“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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