00:00UK inflation numbers have given investors a pre-Christmas surprise, while giving the central bank food for thought.
00:07The inflation rate unexpectedly fell to 3.2% in November. That's its lowest level in eight months.
00:15It's down from 3.6% in October. It comes a day ahead of the Bank of England's interest rate decision.
00:24Drops in the prices of food, clothing and alcohol led that downward trend.
00:29Well, Vicky Price is an international economist. Always good to have you on Global Business Europe, Vicky.
00:34So, look, we keep saying this is an early Christmas present for the Bank of England, also for the UK's finance ministry, but for very different reasons, right?
00:44Well, yes, for the Bank of England, because of the inflation outlook, if they think that maybe the peak has been reached,
00:49then they would be more inclined to cut rates and maybe cut them faster than would otherwise be the case.
00:54Big question marks and all that, of course. And for the Chancellor, Rachel Reeves,
00:58what it means is that maybe she's going to get a little bit more growth if indeed those interest rate cuts do happen,
01:04because the growth figures that she has been given by the official, if you like, forecasters,
01:09the official budget responsibility, suggest, yes, OK, growth, but nothing very spectacular of sort of less than 1.5% next year.
01:18So, any cut in interest rates would be certainly much appreciated by her.
01:23So, but looking at these inflation figures, what stood out for you? Because the food prices are what caught my eye.
01:30Well, yes, because food prices have been rising, rising quite significantly.
01:33But I think it is a global fall that we managed to benefit from.
01:38So, after months and months of real concerns about food and how the increases in prices were getting out of hand,
01:45that seems to indeed have maybe, hopefully, come to an end.
01:49Well, we'll see, but a lot depends on climate and everything else.
01:52On the other hand, though, what retailers found is that people were simply not going into the shops
01:58or not buying online.
01:59So, there were big discounts in November.
02:02We also had a Black Friday sale, which also attracted a lot of interest,
02:08but actually resulted in quite a lot of prices being offered, you know,
02:11much lower prices being offered on many items, including clothing, for example, shoes and so on.
02:17Pre-Christmas, which actually is pretty good for many.
02:20So, a lot of Christmas shopping, I'm guessing, was done in November at those reduced prices.
02:25And I think that's basically what's happened.
02:27And consumers are very careful. They have savings.
02:30They're not spending it.
02:31And they've been worried.
02:32Well, they're worrying, definitely, and have been very careful about what may happen next.
02:36The labour market is slowing down.
02:38And at the same time, of course, taxes are going up.
02:40Well, consumer confidence does remain shaky.
02:43And I know you've said there that the Chancellor, the UK Finance Minister, might think,
02:47oh, there's a little glimmer of hope for growth.
02:49But other economies have a different outlook.
02:50I wonder what the signals are of a weaker economy.
02:54Is a recession around the corner?
02:58I don't think we're quite there yet.
03:00But, of course, anyone who's been looking at the monthly figures for GDP in the UK would wonder what's going to happen next,
03:06because, indeed, we've seen either no growth or drops in GDP over the last few months, and that's not good news.
03:13The question is, will it recover?
03:14And for some reason, the Office of Budget Responsibility and others all have a positive figure for next year of 1.4% in one case.
03:23That's the OBR.
03:24A little bit less by other forecasters.
03:25And I think that is absolutely linked to business confidence recovering, but to a considerable extent also, it's linked to government spending.
03:36If you look at the latest budget, a lot of what's going to be keeping the economy going is the government, in fact, raising taxes and then actually spending a lot of that on public services.
03:48And that is what is going to be sustaining the economy in their view.
03:52A lot of that spending happening up front, in other words, in the next few years, the tax increase is happening later.
03:58So, with a bit of luck, I think they're assuming there's going to be that growth that is government boosted.
04:03Yeah.
04:03And that's what's going to keep us going.
04:05If we get also consumer spending to improve and also business confidence to improve because we have a bit of stability, so much the better.
04:11I'm inspired to go out and start spending.
04:13Vicky Price, thank you very much.
04:15Vicky Price, thank you very much.
