Inflation falls to 3.2% – industry reaction

Latest data from the Office of National Statistics(ONS) has shown that inflation fell by more than expected in November amid a slowdown in food prices. Annualised inflation came in at 3.2% in November, down from the 3.6% reported in October

Commenting on the inflation figures for November, ONS Chief Economist Grant Fitzner said “Inflation fell notably in November to its lowest annual rate since March. Lower food prices, which traditionally rise at this time of the year, were the main driver of the fall with decreases seen, particularly for cakes, biscuits, and breakfast cereals.

“Tobacco prices also helped pull the rate down, with prices easing slightly this month after a large rise a year ago. The fall in the price of women’s clothing was another downward driver. The increase in the cost of goods leaving factories slowed, driven by lower food inflation, while the annual cost of raw materials for businesses continued to rise.”

Anna Leach, Chief Economist at the Institute of Directors, said “Inflation has fallen back decisively in today’s data, and by more than expected, bringing the rate to its lowest since March. Food price inflation has eased sharply to its lowest rate since April, despite typically rising at this time of year, while services inflation – a key indicator of domestic price pressure – has also edged down. Together, these figures increase the likelihood of a welcome interest rate cut tomorrow.

“Recent indicators point to a notable weakening in both the economy and the labour market, with unemployment reaching its highest level since 2015. Today’s inflation outturn has also come in below the Bank of England’s expectations, driven in part by unexpectedly soft food prices. The Bank will also assess the impact of the recent Budget on the outlook for inflation. And despite being trailed as actively disinflationary, the Budget’s effects are more mixed due to the increase in spending and borrowing over the next two years. But on balance, the case for a rate cut has been made.”

Mike Randall, CEO at Simply Asset Finance said “Lower inflation offers a small seasonal boost for the Chancellor, gently stoking the coals of optimism for businesses and helping move the economy in a more intentional direction”

“But lower inflation alone won’t sustain this trajectory. With the Budget now in the rear-view mirror, one of the Government’s New Year’s resolutions must be a more intentional approach to supporting businesses with access to finance and long-term investment. UK firms have remained resilient throughout 2025, as recent growth figures show, but that resilience cannot be taken for granted. Productivity – driven by better-equipped, better-financed businesses – will be what ultimately underpins a stronger, more sustainable UK economy.”

Sarah Coles, Head of Personal Finance at Hargreaves Lansdown said “Like the waistband on a dieter, food changes helped inflation shrink notably in November. It’s following the path the Bank of England had forecast – peaking in September and gradually moving south. However, it’s moving faster than had been expected, which means tomorrow’s rate cut is all-but nailed on. It could persuade borrowers and savers to take action.

“Food prices helped fuel the fall. After rising the previous month, food inflation fell to 4.2%. Your experiences at the supermarket will still depend enormously on what you buy. Striking annual rises included beef and veal up 27.7%, whole milk up 14.8% and butter at 12.1%. Cattle farmers are still feeling the financial impacts of a poor grass harvest – as well as increased labour costs throughout the production and sales process. Festive favourites face a more mixed picture with the price of chocolate up 17.3% but poultry up just 3.3%, cheese up 2.2%, potatoes up 0.5% and sauces down 0.3%. Christmas dinner may not be much more expensive than this time last year, but the sweet treats could bust the budget.

“Alcohol and tobacco inflation also fell. Some of this will be booze discounting ahead of Christmas, to get people through the doors of the supermarkets, but duty changes play a big role, because tobacco duty is hiked in the aftermath of the autumn Budget. By the time the data was collected last year it had taken effect, but this time round it hadn’t. Black Friday discounts were heavier this year, pushing clothing and footwear prices lower. They were down 0.6% in the year. Sluggish sales persuaded retailers that they had to work harder to get people through the doors, so discounts were heavier this year – particularly for women’s clothing and shoes.

“Energy prices continued to spark lower inflation, as a lower energy price cap rise in October than the year before mean electricity prices are up just 2.8% and gas prices 2.1%. The Budget brought some good news for energy bills, with the removal of charges that are expected to cut the cost by £150 a year from April. Given that otherwise the forecast was for a rise in the price cap in April, this will be a relief for hard-pressed bill payers.”