Credit, Collections & Insolvency News
Latest data from the ONS showed annualised inflation remained at 4% in January, unchanged from December. Economists had predicted a small rise, however prices were down 0.6% in a month. The numbers are a long way from the peak at 11.1% in October last year,
Commenting on the data Sarah Coles, Head of Personal Finance at Hargreaves Lansdown said “Like a tall man in a cramped cottage, we were braced for a bump, so it’s a relief that inflation held at 4%. The even better news is that it’s expected to fall sharply from here. However, we can’t afford to relax, because there will still be bumps along the way.
“Behind the placid headline figure, there was plenty of movement. The £94 hike in the energy price cap in January means that electricity was up 4% on the month and gas up 6.8%. Both are down over the year and energy prices are nowhere near as painful as in the immediate aftermath of the invasion of Ukraine. Prices are down 18% from the peak in January 2023. However, they’re still far higher than before all this started – up 89% since January 2021. Energy bills are still a stretch for millions of families, and separate ONS figures show that more than two in five say it’s difficult to pay these bills.
“Petrol prices eased a little – but not as much as they did the same time last year – putting upwards pressure on inflation despite the fact diesel prices are 13.8% lower than this time last year and petrol down 6.4%. Meanwhile second-hand car prices rose slightly during the month for the first time since last May. Elsewhere in the transport sector, the usual annual cheap flight bonanza kicked in at the start of the year. Air fares fell further than the same time a year earlier, offsetting some of the rises elsewhere.
“The inflation rate of food and non-alcoholic drink eased for the 10th month in a row – to 6.9%. For the first time since September 2021, food prices actually fell in the month – by 0.4%. This is actually the biggest fall since July 2021. As ever, how this affects you depends an awful lot on what you buy, and some baskets will still be far pricier than they were this time last year, with hot chocolate up 25.1%, olive oil up 38.2% and sugar up 18%. If you buy alcohol and tobacco, inflation is still at 12.4%. Meanwhile, comfort eating became more affordable as cake, chocolate biscuits and crisps helped bring food inflation down. And vitally the price of some staples has actually fallen, including whole milk down 10% and butter 7.8%. Unfortunately, this doesn’t mean we’re set for a bargain trolley dash any time soon: when you look over the past two years, food and non-alcoholic drink prices still are up an eye-watering 25%.
“Furniture and household goods also weighed in on the side of lower inflation, with prices falling 3.1% between December and January. Furniture and furnishings played a big part in this, as all those New Year sofa and kitchen sales ate into higher prices.”
Alastair Douglas, CEO of TotallyMoney said “While inflation has dropped far below its 11% peak, the impact will be felt for years to come. The cost of living is now considerably higher than it was, and the poorest households have been hit the hardest.
“Savings have been spent, and the government is barely supporting those it’s supposed to serve. For 11 million people, borrowing is now the only option — but many mainstream lenders are choosing not to lend to those who need it the most.
“Unregulated borrowing is soaring, meaning many are turning to buy now pay later, payday loans and illegal money lenders — falling off the radar and papering over the cracks of what in reality is a financial crisis.
“So while the headline numbers may say inflation is low, or unemployment is steady, the reality is that millions of people are struggling to keep up, more than half a million UK businesses are in significant financial distress, and nobody is receiving the levels of support they need to survive.”
Lalitha Try, Economist at the Resolution Foundation, said “No news is good news along the bumpy road back to 2 per cent, with inflation flatlining at 4 per cent in January, confounding expectations of a rise.
“Instead, rising energy costs in January were offset by falling furniture and food costs – with food prices falling for the first time since September 2021. This is welcome news for low-income households who spend a higher proportion of their income on food.”
Andy Mielczarek, Founder and CEO of SmartSave, a Chetwood Financial company, said “Inflation’s not budging, but today’s data does at least defy many experts’ prediction of another rise. Either way, it will all fuel the ongoing discussion around when the Bank of England will start cutting the base rate.
“But there’s still a considerable distance to cover before the Bank’s 2% inflation target is reached. At this time, those in a position to save lump sums should be proactive, capitalising on any potential advantages presented by the heightened base rate. The Bank of England’s next interest rates decision comes on 21 March, and all eyes will be firmly on how the battle against inflation shapes up over the intervening six weeks.”
