Inflation remains flat at 6.7% – consumer credit reaction

19th October 2023

Latest National Statistics (ONS) figures show that annualised inflation was flat year-on-year at 6.7%, the same as in August, with a fall in the price of food and drink offset by rises in transport, restaurant and hotel costs

Annualised inflation was forecast to come in at 6.6%.

Commenting on the figures, David Cheadle, Acting Chief Executive of the Money Advice Trust said “Inflation remains stubbornly high and these figures will do nothing to alleviate the anxiety for millions of people already dealing with mounting debts. Our advisers at National Debtline are hearing first-hand the impact that sustained high costs have had on struggling households”

“With winter fast approaching, many people are once again facing impossible choices between turning the heating on or going without meals. More action is needed to support households experiencing financial difficulty, including through a government backed ‘Help to Repay scheme to help with unaffordable energy arrears.”

Andy Mielczarek, Founder and CEO of SmartSave, a Chetwood Financial company, said “The light at the end of the tunnel is still a long way away. Inflation is proving very sticky, remaining at a level that will keep many households on their toes. Inflation does more to individuals’ finances than just increase the costs of their utilities and the weekly shop – prolonged periods of high inflation diminish the value of savings in real terms. Thankfully, we’re in a position now where higher interest rates mean opportunities to achieve competitive returns on savings. But crucially, as many consumers will be acutely aware, not all banks have been passing better rates on to savings customers, essentially triggering a ‘loyalty penalty’ for savers who do not shop around.”

“As inflation and interest rates continue to shift, the onus is on consumers to consider where best to put their money to maximise returns. The gap between the best and worst savings products is vast, so anyone with a reasonable savings pot must assess which providers and products can help them grow it.”

Simon Webb, Managing Director of capital markets and finance at LiveMore said “The annual Consumer Prices Index (CPI) inflation has stalled again and remained stubbornly at 6.7% in September. But other elements of the inflation figures have also not budged.”

“The Consumer Prices Index including owner occupiers’ housing costs (CPIH) also stayed where it was last month at 6.3% as did core CPIH at 5.9%, which excludes energy, food, alcohol and tobacco. The only minor shift downwards among these four inflationary figures was core CPI at 6.1%, down from 6.2% in August. This was mainly due to goods such as food falling slightly but services like transport were up.”

“Whether this is enough to stave off another base rate rise next month is debateable and no doubt the next Monetary Policy Committee meeting will be a hive of debate. The last meeting was as close as it gets with members voting 5 to 4 in favour of keeping base rate at 5.25%. With average wage growth exceeding inflation, for the first time in nearly two years, the MPC may decide to raise rates again, which is not what we want to see.”

Alastair Douglas, CEO of TotallyMoney said “Yesterday, the Chancellor told us, ‘It’s good news that inflation is falling and real wages are growing, so people have more money in their pockets’. But let’s not forget that just because inflation is slowing, it doesn’t mean prices are falling. The cost of living is still increasing, and prices are still rapidly rising — they have been for two years.”

“As a result, one in three adults would find it difficult to cover an unexpected bill of £100, and 2.6 million low income households have turned to high cost or illegal money lenders. More people are missing mortgage repayments, and nine million households are going into winter without any energy credit.”

“So, while it is good news that inflation has dropped from its 11.1% peak this time last year, much more needs to be done to protect the vulnerable. Otherwise, it’s going to be another long, cold winter.”

Joanna Elson, Chief Executive of national older person’s financial hardship charity Independent Age, said “Today’s inflation figure of 6.7% means that the prices of everyday essentials will continue to rise much faster than pre-pandemic levels. The cost of living remains extremely high, and we know that many older people on a low income are struggling, often in desperate circumstances. We have heard harrowing tales, that range from not showering daily because of high water costs, to eating dog food because it’s cheaper. This shouldn’t be happening.” 

“Despite today’s inflation figure meaning the State Pension will likely rise by 8.5%, the one in five single pensioners who are solely reliant on the State Pension and other benefits for their income will still struggle to pay their bills when this extra money reaches them next Spring.” 

“There has been a lot of debate about the State Pension triple lock, and it’s not a perfect long-term solution. However, for the millions of older people living in financial hardship, it is vital in protecting the value of their often dangerously low income, helping them cope with the elevated cost of living.”

“In the short term, the government must act to ease financial pressures that are causing misery for millions of older people across the UK. We want to see the introduction of additional financial support this winter for the most vulnerable, including older people living on low incomes. Along with many other charities, we are also calling on the government to introduce an energy social tariff to provide more protection from high prices and end the postcode lottery of water social tariffs by introducing a single social tariff for water.”

“To stop the annual stress and uncertainty over this issue and give long-term assurance to people of all ages, there should be a cross-party review to agree on the level of income everyone needs in later life to avoid poverty and what the UK government can do to make sure everyone receives this.” 

Sarah Coles, Head of Personal Finance, Hargreaves Lansdown said “This could be a sticky situation for the Bank of England, because inflation held firm in September, defying expectations of a slight fall. While we saw welcome drops in food inflation and furniture and household goods, the impact of rising oil prices made their presence felt. Petrol and diesel are the canaries in the coalmine, and as higher oil prices make their way through supply chains, it could mean inflation is hard to shift.”

“Oil prices have played a massive part in stubborn inflation, with the average price of petrol rising by 5.1p per litre between August and September to sit at 153.6p. Compare this to last year, where prices fell 8.7p in the month. It’s still worth bearing in mind that prices are still a long way away from the painful costs we saw a year ago – with petrol prices down 7.7% and diesel down 13.4% since then. However, we know these rises have continued into October, and with everything that’s happening in the Middle East, there’s a chance even higher prices are on the way. Plus, of course, we tend to feel rises at the pumps first, before the oil price rise gradually filters into the cost of almost everything we buy.”

“Marginally better news was that core inflation (excluding energy, food, alcohol and tobacco) dropped very slightly from 6.2% to 6.1%. This tends to take volatility out of the picture, which has protected it from the rapid rise in petrol prices. The Bank of England keeps a close eye on this when setting rates, but while any drop is better than none, it’s not a big enough fall to fill rate setters with rock solid certainty that inflation will fall fast from here.”

“There have been some positives though, most notably another drop in food inflation, to 12.1%. There are still some horrible price rises in the supermarket – including olive oil at 47.4%, sugar at 59.3% and sauces at 29%. However, there are some key household staples that are actually cheaper than this time last year – with whole milk down 0.5% and butter down 2.5%. So, depending on their shopping lists, some shoppers could end up with more change in their pockets.”

“Furniture and household goods also helped avoid a rise in inflation. In this case, it’s more to do with the fact that a big rise a year ago dropped out of the figures, and was replaced with prices that were largely flat. There were also some pretty sizeable falls, including cleaning equipment down 11.8%, and appliances and electrical goods down 1.8%. There were particularly striking falls in the price of washing machines, heaters, hoovers and fans.”