UK inflation sinks below 10% for the first time since August

U.K. inflation data paints a picture of the British economy.

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LONDON — U.K. inflation dropped sharply in April, as energy prices retreated and the impact of Russia’s invasion of Ukraine began to drop out of the annual consumer price comparison.

Headline CPI inflation came in at 8.7% year-on-year, the Office for National Statistics said Wednesday, down from 10.1% in March but above a consensus estimate of 8.2% from a Reuters poll of economists.

“Electricity and gas prices contributed 1.42 percentage points to the fall in annual inflation in April as last April’s rise dropped out of the annual comparison, but this component still contributed 1.01 percentage points to annual inflation,” the ONS said in its report.

“Food and non-alcoholic beverage prices continued to rise in April and contributed to high annual inflation, however, the annual inflation rate of food and non-alcoholic beverages eased, from 19.2% in the year to March 2023, to 19.1% in the year to April 2023.”

On a monthly basis, consumer prices rose by 1.2%, above a consensus estimate of 0.8%.

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 7.8% in the 12 months to April 2023, down from 8.9% in March, while core CPI (excluding volatile energy, food, alcohol and tobacco prices) rose by 6.8%, up from 6.2% in March, which will concern the Bank of England.

British inflation has remained stubbornly high even as the economy has defied expectations for a recession, prompting the Bank of England to hike interest rates for the 12th consecutive time to 4.5% at its last meeting earlier this month.

Economists broadly expect a further hike at its next meeting as inflation remains stickier in the U.K. than in comparable major economies, while the labor market has stayed tight and Governor Andrew Bailey has warned of a wage price spiral.

On Tuesday, Bailey acknowledged to lawmakers that there are “very big lessons to learn” from the Bank’s failure to forecast the strength and persistence of inflation.

As British households continue to contend with high food and energy bills, workers across a range of sectors have launched mass strike action in recent months amid disputes over pay and conditions.

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