Inflation falls to 6.8% – consumer credit industry reaction

17th August 2023

Latest ONS data has shown that CPI inflation fell to 6.8% in July,  down from 7.9% in June and well below the peak of 11.1% in October.

Commenting on the data, Joanna Elson CBE, Chief Executive of the Money Advice Trust said “This fall in the rate of inflation is an early sign that the relentless pressure of rising prices is beginning to ease.  Our hope is that this is the case, but the reality for millions of people is that they are far from out of the woods. Prices are still high, budgets are still stretched and millions are struggling to cope.”

“Ensuring there are safe routes out of debt for those most severely affected by the cost of living is now vital.  I would urge the Government to remove barriers preventing people accessing debt solutions, including reducing or waiving fees for debt relief orders and bankruptcy.”

Sarah Coles, Head of Personal Finance at Hargreaves Lansdown said “Inflation slid in July, thanks to lower energy bills and easing food inflation, but core inflation is wearing short shorts on a hot slide, so the descent is far stickier and more painful than anyone hoped. Core inflation (excluding energy, food, alcohol and tobacco) remained unchanged from June, at 6.9%. This was widely predicted, but will still come as a disappointment for the Bank of England, which has a beady eye on this measure when setting interest rates.”

“Gas and electricity prices had a major part to play in the fall in inflation, with the lower energy price cap kicking in and cutting bills for millions of people on standard tariffs. It wasn’t a massive cut, and prices are still way ahead of where they were before inflation took off, but it’s a ray of light after what has been a particularly dark time for billpayers. Relief at the supermarket tills also continued to spread. In the vast majority of cases, it’s not that things are getting any cheaper, it’s just that prices are rising more slowly. However, grocery inflation has dropped back very slightly to from 17.3% to 14.8%, as lower wholesale prices finally feed through to more shelves. We can’t guarantee the easing continues. There are still horrible geopolitical issues, and the export of wheat from Russia and Ukraine depends on delicate international agreements. There’s also the threat from weather phenomena, which could cause more spikes – the price of olive oil is still up 41.5% on the back of crop failure.”

“Anyone counting the cost of a shockingly expensive holiday this year will be unsurprised to learn that the rising price of flights and hotels were one of the factors pushing inflation up. In the aftermath of the pandemic, we’re not prepared to forego our annual holiday. Pressure on flights means we’re paying handsomely for scarce seats. Meanwhile, closer to home, the staff-intensive hospitality industry is charging more to cover ever-higher wage bills – and we’re paying the price. The real worry is how much of this added cost is affordable, and how much has been slapped onto credit cards by people who can’t afford the stretch, but just can’t face another summer at home in the rain.”

Ian Somerset, Chief Executive of Money Wellness said “Today’s inflation figures falling to 6.8% show some promise for households. However, they won’t have much of an impact for those already struggling to make ends meet, with 67% of people contacting us over the past quarter living in a budget deficit each month – and a further 15% having between zero and £100 to live on after essential bills are paid. And there’s even greater storm clouds on the horizon. Mortgage repossessions may be down – thanks to Jeremy Hunt’s intervention earlier this year – but arrears are up and rising.”

“We’re starting to see the effects of consecutive interest rate rises, with calls from homeowners seeking debt help growing weekly. And we’re expecting a tsunami effect to be felt by renters too – who perhaps are most financially vulnerable to interest rate hikes – as landlords look to pass on increases.”

“With wage rises likely to fuel – if not increase – inflation for the next year, perhaps now’s the time for more radical thinking when it comes to controlling inflation before a generation is lost to debt.”