Inflation surge eases – though low-income households still face double digit inflation

Britain’s inflation surge eased in August – falling for the first time since September 2021 – but it remains higher for low-income households, and will remain elevated for everyone well into next year, the Resolution Foundation said today (Wednesday) in response to the latest ONS prices data.

CPI inflation fell from 10.1 per cent to 9.9 per cent in August – a fall entirely driven by falling transport costs. However, the cost-of-living gap between high and low income households grew – with the poosrest tenth of households experiencing an average inflation rate of 10.6 per cent, compared to 9 per cent for the richest tenth.

Looking further ahead, the government’s Energy Price Guarantee is set to reduce inflation by around 4 percentage points relative to what it could have risen by – thus preventing a fresh winter surge in prices this winter.

Producer price inflation has also turned a corner – with the annual rate falling by 2.1 percentage points in August – though at 20.5 per cent this leading indicator of future consumer prices suggests that elevated inflation will be with us for some time.

Jack Leslie, Senior Economist at the Resolution Foundation, said:

“High inflation continues to drive Britain’s cost-of-living crisis, but the outlook has brightened considerably over the past week.

“The Energy Price Guarantee should prevent a second winter surge in prices, while factory gate inflation is starting to ease.

“However, high inflation is set to be with us for some time, particularly for low-income households who continue to be hit hardest by high prices. Having delivered £2,200 worth of cost-of-living support for every household this year, the government will need to consider what support will be needed next year too.”