After yesterday’s disappointment there was some better news for the UK economy this morning.
The Consumer Prices Index (CPI) rose by 3.2% in the 12 months to November 2025, down from 3.6% in the 12 months to October.
This will have had the research student presenting the morning meeting skipping their way around the corridors of the Bank of England as they await their chance to say “Well played Sir” to Governor Andrew Bailey. They will have to be quick though to make sure their voice is heard as everyone joins in. Plus there was news that will mean only the best cakes today for the cake trolley.
On a monthly basis, CPI fell by 0.2% in November 2025, compared with a rise of 0.1% in November 2024.
That is genuinely welcome news after a period where the UK has been an inflation outlier as we look to be heading back into the pack. Those who follow the comments section will know that Canada for example looks to be heading the other way via a problem which has bedeviled us (higher food prices).
In fact today’s news was sufficient to attract the attention of BBC economics editor Faisal Islam thereby quelling concerns about his welfare after he went missing on social media yesterday.
Lowest core inflation for over 4 years, services inflation and food inflation down too… goods inflation now 2.1%. With inflation heading towards target next year (including Budget measures) a cut tomorrow even more likely and question arises about how many more next year…
I predict an inflationary surge in the use of the word “disinflation” tomorrow in the Bank of England Minutes. After all they used it in a completely inappropriate fashion when inflation was rising so the use of it tomorrow is likely to get out of control.
One area that will cause frowns at the Bank of England but I welcome is this.
On a non-seasonally adjusted basis, average UK house prices decreased by 0.1% between September 2025 and October 2025, compared with an increase of 0.2% in the same period 12 months ago. ( Land Registry)
Our research student will no doubt cover this off by pointing out that tomorrow’s interest-rate cut will show that the Governor is handling this situation masterfully. They may even be sharp enough to avoid this entirely.
On a seasonally adjusted basis, average house prices in the UK increased by 0.1% between September 2025 and October 2025.
That is a masterful manipulation of a fall of £2000 in October from £272,000 to £270.000.
What happened in November?
There were several fallers on a monthly basis this time around which is nice to see. But the headline act is below.
On a monthly basis, food and non-alcoholic beverages prices fell by 0.2% in November 2025, compared with a rise of 0.5% a year ago.
The main player here was a 1.3% decline in the price of bread and cereals, followed by the other category at 0.7% and meat prices at 0.6%, In annual terms we saw a decent move lower.
Food and non-alcoholic beverages prices rose by 4.2% in the 12 months to November 2025, down from 4.9% in the 12 months to October.
Still much too high but at least there is a little hope. One area that continues to disappoint though is this.
sugar, jam, syrups, chocolate and confectionery
I am thinking of the latter two there because cocoa futures have halved since their peak and yet chocolate prices have not fallen. This time around the category above saw a 0.3% monthly rise. Putting it in terms of the Shaun shopping basket the Lidl fruit and nut bar which has risen from £1.09 to £1.85 remains at £1.85.
The sin category also saw a decline.
On a monthly basis, prices fell by 0.4% in November 2025, compared with a rise of 1.4% a year ago.
Which had quite a sharp impact on the annual rate.
Prices in the alcohol and tobacco division rose by 4.0% in the 12 months to November 2025, down from 5.9% in the 12 months to October.
Beer prices fell by 1.5% and as it was apparently driven by lager prices I should be particularly welcoming it. A little care is needed here though as the Chancellor sightly delayed this year’s rise in tobacco prices rather than halted it.
Duty rates on tobacco did not increase in 2025 until 26 November, which was after the data collection period for the month.
There was also a fall in the clothing category. This area was particularly affected by the cost of living crisis.
On a monthly basis, prices fell by 0.3% into November 2025 compared with a rise of 0.6% a year ago.
The move was quite technical though as with its present problems I doubt the Office for National Statistics can deal with Black Friday properly.
These price movements, to some extent, reflect changes in the proportion of discounted prices in the datasets. This proportion increased between October and November in both years, possibly linked to the influence of Black Friday, but the increase was greater in 2025 than 2024.
There was another welcome fall for those flying because airfares fell by 19.8% in November. However does anyone believe that the number of flights has fallen in a year by 13%?
Prices overall fell this year by more than a year ago. However, as the weight has decreased between 2024 and 2025, this has resulted in a small upward effect on the all items 12-month rate change.
Cost of Living
The best UK measure for this is the Retail Prices Index or RPI.
The all items RPI is 405.6, down from 407.4 in October….The all items RPI annual rate is 3.8%, down from 4.3% last month.
The larger annual decline was driven by the housing category which CPI is very weak on via its exclusion of owner-occupiers.
Annual rate +4.1%, down from +4.6% last month
The monthly fall for housing was 0.15% and we now looking ahead that a house price decline is on its way.
For those wondering about the previous measure the Bank of England targeted it is below.
The annual rate for RPIX, the all items RPI excluding mortgage interest payments (MIPs), is 3.7%, down from 4.2% last month.
Looking Ahead
Our leading indicator for this area is a little more mixed.
On a monthly basis, producer input prices rose by 0.3% and producer output (factory gate) prices rose by 0.1% in November 2025.
But as October was a 0% for input prices the two monthly trend is better and today’s news reinforces that for a major input.
CHART OF THE DAY: Oil glut triggers a rout.
Brent <$60 a barrel
WTI <$55 a barrel
Both on track to lowest closing price in ~5 years ( Javier Blas)
So there is hope here if this is sustained.
Comment
The welcome news of lower annual inflation and more importantly a monthly fall in both inflation and the cost of living has been welcomed by financial markets. The UK FTSE 100 has surged more than 100 points to above 9800 and the UK Gilt or bond future is around half a point higher.
However the underlying picture is one where inflation is above our peers and a weak economy tends to reduce inflation. We will no doubt here quite a bit on that tomorrow from the Bank of England as it loves its “output gap” theory. Putting it another way the UK Misery Index if you add the unemployment rate to the RPI inflation rate is 8.9% presently.
There may be some better performance at the Office for National Statistics as they appear to have realised that a grounding in nursing whilst worthy in itself is little help in dealing with national statistics.
Acting national statistician Emma Rourke is to leave post to take up a new job, the UK Statistics Authority has announced.
UKSA said Rourke would depart later this month ahead of starting work on the Whitehall in Industry scheme.
