Report
Economic Monitor: Non-food outperforms food, inflation set to dip below 3%
12 January 20262 Minute Read
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Following a Christmas interest rate cut, the prospects for the UK appear to be improving somewhat. A decline in inflation is expected to take place more rapidly than first thought, potentially heading below 3%, this quarter. This will push up on real earnings growth, bringing it closer to 1% growth, where more recently it has been plateauing. This should support consumer sentiment and spending power, over the course of this year.
Harvir Dhillon, Economist
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Key Data
- GDP contracted 0.1% in the three months to October, compared with 0.1% expansion in the three months to September. Services activity was flat and the largest upward contributor was real estate activities as well as administrative and support activities.
- Inflation eased notably in November, and the Consumer Price Index annual rate fell to 3.2%, down from 3.6%. Fuel prices rose for both petrol and diesel in December, and petrol averaged £1.36 per litre and diesel £1.46.
- The BRC-KPMG measure of retail sales rose by 1.4% in November (compared to the previous year), down from 1.6% growth in October.
- In the three months to October, average regular pay (excluding bonuses) was estimated at £687 per week in nominal terms (not adjusted for inflation), higher than the estimate for a year earlier (£658 per week) and £495 per week in real terms (constant 2015 prices), higher than the estimate for a year earlier (£492 per week).