Yahoo Finance Where prices are rising and falling as UK inflation drops
Inflation has fallen to its lowest level in two-and-a-half years, driven largely by slowing food price rises.
The consumer prices index dropped to a two and a half-year low of 3.2% in March, according to the Office for National Statistics, which was down from 3.4% the previous month but higher than economists’ forecasts of 3.1%.
The measure remains above the Bank of England´s 2% target.
Prices for food and non-alcoholic beverages rose by 4% in the year to March 2024, down from 5% in February. The March figure is the lowest annual rate since November 2021, according to the ONS.
Lower inflation does not mean prices overall are coming down, they are just rising less quickly.
Butter and milk cheaper as olive oil soars
Food prices overall might be at a two-and-a-half years low but not every grocery item moved the same way over the last year.
Read more: UK inflation drops to 3.2% in March as Bank of England hints at rate cuts
Butter (-11.7%) and whole milk (-11.1%) actually got cheaper in the past 12 months, in a relief to many UK households. Frozen seafood, jams also cost less at the checkout.
Some other foods like bread, cereals and meat still rose in price but that pace slowed down.
However, olive oil appears to be on its own trajectory as it surged over 40% in the 12 months to March.
Much of the price surge is due to drought and extreme heatwaves in countries such as Spain, where production halved in 2023.
A 1 litre bottle of olive oil at a supermarket today will set you back around £14.
Regarding food and non-alcoholic beverages prices, the ONS said: “Prices have been relatively high but stable since early summer 2023, rising by less than 2% between May 2023 and March 2024. This compares with a sharp rise of around 22% seen between March 2022 and May 2023.”
Energy prices ease but household costs still bite
After reaching record highs, energy bills have come down as the cost of electricity, gas and other fuels have eased.
When prices soared after Russia invaded Ukraine in 2022, the government introduced a temporary Energy Price Guarantee to limit bills. Without it, bills would have reached over £4,000.
However, families still felt the squeeze as that cap became lower over time. Now, inflation figures show that energy prices have decreased by 18%, after almost doubling last year.
Housing expenses also kept falling, albeit at a slightly slower rate, at -1.6% in March, from -1.7% in the previous month.
Read more: UK rents are up by 9.2% in a record yearly rise
Still, regular expenses such as car insurance, medication, the post office and holidays have all gone up in price.
Transport costs bounced back, advancing by 0.1% in March, following the four previous months seeing declines. This was mainly due to motor fuel costs looking up slightly as well.
Next month's overall inflation figure looking back at April is expected to show a bigger drop as the lower energy price cap is taken into account, even as households' direct debits remain higher.
Read more: Multiple UK interest rate cuts less likely this year after inflation blow
Alcohol will cost you more but not hotels
Hotels and restaurants inflation also inched up at a slower rate, at 5.8% compared with 6% in February. Similarly, culture and recreation prices grew more slowly in March, coming in at 5.3%, from 5.4% in February. Furniture and household items also fell.
Alcohol however, has bucked the downward trend to see prices more than double over the past year. Inflation here rose 12.1% in March, when that same month last year prices had climbed 5.3%.
Overall, while the rate of inflation has dropped, goods in the shops are still more expensive than they were a year ago.
Watch: UK inflation cools to 3.2% after further slowdown in food prices
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