Inflation falls to 7.9% – business industry reaction

20th July 2023

Latest data from the Office of National Statistics (ONS) has shown that the annual rate of CPI inflation fell to 7.9% in June 2023.

The figures is down from 8.7% in May and well below market expectations. Inflation peaked at 11.1% in October. Core CPI inflation (stripping out energy, food, alcohol and tobacco) finally fell slightly – to 6.9% from 7.1% in May.

Commenting on the inflation figures for June, ONS Chief Economist Grant Fitzner said “Inflation slowed substantially to its lowest annual rate since March 2022, driven by price drops for motor fuels. Meanwhile, core inflation also fell back after hitting a thirty-year high in May. Food price inflation eased slightly this month, although it remains at very high levels.”

“Although costs facing manufacturers remain elevated, especially for construction materials and food items, the pace of growth has fallen across the last year with the overall cost of raw materials falling for the first time since late 2020.”

Kitty Ussher, Chief Economist at the Institute of Directors, said “This very welcome fall in the headline rate of inflation is predominantly driven by petrol prices that fell in June, plus food prices not rising as fast as they did a year ago. We’re also seeing less price pressure in the sale of manufactured goods.”

“However, core inflation has only eased slightly. The Bank of England will also be concerned that inflation in the services sector is proving relatively persistent.”

“The main story today is that inflation is lower than expected, fuelling a narrative that we are through the worst. The Bank of England will hope that this will cause business leaders and others to lower their expectations of future inflation, which could then become self-fulfilling.”

Helen Dickinson, Chief Executive of the British Retail Consortium, said “Efforts by retailers to curb price rises and reduce inflation appear to be paying off as inflation rates for food fell for the third month in a row. Prices for cheese, fruit and fish all dropped as lower commodity costs and cheaper energy prices filtered through to customers. There were also drops for many non-food items such as children’s clothing, household textiles, and domestic appliances, boosted by an increase in summer discounting. However,  supply chains remains volatile: Russia’s decision to pull out of the Black Sea Grain Initiative could increase costs for some staples in the future.”

“Falling inflation rates are welcome news, and a clear sign that competition is bringing down prices wherever cost pressures ease. Retailers are doing their bit but Government also has a role to play to bring inflation down: the upcoming Deposit Return Scheme and reformed packaging levy ( would saddle retailers with another £4bn in costs, putting renewed pressure on prices. Government should reconsider the timelines for these interventions especially on the back of costs arising from Windsor Framework labelling, and upcoming increases to business rates.”

Alex Veitch, Director of Policy at the British Chamber of Commerce, said “Today’s data show that while consumer price and core inflation remain stubbornly high, businesses’ input prices have fallen.”

“While firms’ costs are now much higher than a year ago, the fall in the input rate will give some hope that consumer price inflation will soon start to ease. However, the drivers of price rises have shifted with labour costs now the most significant factor. This may slow down the rate of CPI decline – due to the high number of job vacancies.”

“Our latest Quarterly Economic Survey in July, of 5,000 businesses, showed that fewer firms are now expecting their prices to rise, and while inflation remains the top concern, the numbers worried have been falling since the end of 2022.”

“The drivers of inflation are diverse with most (68%) now citing labour costs as a key pressure, 63% citing utilities, and 45% citing raw materials. Labour costs may remain an issue for business for some time; although the figure has been steadily falling, there are still around 1 million job vacancies in the UK.”

“However, for manufacturers, 75% cited raw materials as the main cost pressure, and hospitality firms were far more likely than all other sectors to cite utility costs as a worry.”

“But overall, our data show there has been optimism building in the business community that future prices rises might not be inevitable. Today’s ONS findings will be an important factor for the Bank of England to consider going forward.”