The latest inflation figures from the Office for National Statistics (ONS) reveal that the Consumer Prices Index (CPI) for October 2024 rose to 2.3%, up from 1.7% in September. This marks the first increase in inflation since July, and it has sparked interest among business owners, economists, and policymakers alike.
The rise in inflation was widely anticipated, and as a result the Bank of England have already signalled that any future cuts to the base rate will happen gradually. However, the latest CPI figures make it unlikely that the Bank will reduce rates any further when they meet in December.
What’s driving the numbers?
According to the ONS, the rise in inflation for October was largely driven by higher energy costs. However, other factors helped to balance the increase:
- Falling ticket prices: Live music and theatre ticket prices dropped.
- Lower business costs: Raw material costs for businesses have been falling. Despite these offsets, some sectors faced steeper price increases:
- Services inflation: Inflation in the services sector, which includes services like haircuts, hotels, and airfares, rose to 5%.
- Alcohol and tobacco: Prices for these items rose sharply. Encouragingly though, food inflation remained unchanged from September.
What does this mean for your business?
The rise in inflation, though modest, signals shifts that businesses may need to navigate carefully:
- Energy costs: You should revisit your energy usage and consider whether you might be able to reduce costs, either through using energy more efficiently, or considering whether a different supplier or price plan could meet your needs at a lower cost.
- Pricing strategies: Businesses in the services sector should prepare for potential challenges as rising costs affect consumer spending patterns. Balancing price increases with value will be key to maintaining customer loyalty.
- Cost control: With raw material costs easing, this may be a good time for manufacturers and retailers to lock in supply contracts or reassess margins.
A broader economic context
While inflation has ticked upwards, this is in line with the Bank of England’s forecast that inflation will temporarily rise again before reducing in 2025. For now, businesses can take heart that interest rates are unlikely to rise sharply in the near term. However, with base rate cuts now likely to come more slowly than had been hoped earlier in the year, borrowing costs will remain a factor for planning and investment.
Also, while October’s figures suggest only a modest uptick, sector-specific changes - particularly in services and energy - highlight the importance of staying agile in your pricing and how your business operates.
This period of mild inflationary growth is an opportunity for forward-thinking businesses to fine-tune their strategies for the months ahead.
See:
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HM Revenue and Customs (HMRC) have announced the launch of a new interactive online tool and clearer guidance for those who are already self-employed and those considering it.