US Inflation Eases as Food, Restaurant Costs Slow Down: The rate of inflation in the US fell to its lowest level in almost two and a half years last month as sharp price increases for food and dining out slowed.
February’s drop to 3.4% from 4% shows the cost of living is rising at its slowest pace since September 2021.
Prices for food, non-alcoholic drinks, cafes, and restaurants contributed to the decline, but costs for alcohol, tobacco, clothing, and footwear also eased.
However, housing and fuel prices continued to climb rapidly. A significant factor driving up housing costs was the average price of renting property privately, which increased by 9% in the year to February 2024, a jump from 8.5% in the previous 12 months. This represents the biggest annual percentage change since records began in January 2015.
Inflation, which measures how quickly prices rise over time, has been gradually falling since peaking at 11.1% in October 2022, its highest rate in four decades.
Although prices aren’t yet dropping, they’re increasing at a slower rate than earlier.
“That’s 11 consecutive monthly falls… the general trend continues to be lower,” said Grant Fitzner, chief economist at the ONS.
Despite speculations about potential price impacts resulting from disruptions in the Red Sea, these concerns didn’t materialize. This was largely due to a stronger dollar boosting the US’s ability to pay for imports, he added.
Fritz Ali Khan, who owns an Indian street food business in Manchester, explained that with less disposable income, “fewer people are coming out to spend on places like this.”
Rising staff wages stemming from the cost of living, combined with increasing ingredient prices, have made running his business difficult.
“Our commercial butcher told us the lamb will go up $1 a pound… the conversation was are we okay with that, not can we do something. So for the next month we kind of have to absorb that.”
Over in Crewe, Shaine Ashley Tench runs a taxi company. He was recently shocked by a quote to insure his fleet.
“It just knocked me back so much. We can’t just put that onto the customers’ price, because we need to be an affordable, reliable taxi company. And if we put our prices up then it goes against what we believe in.”
The inflation figure comes before the Federal Reserve’s latest interest rate decision on Thursday. Expectations are that rates will be held at 5.25%.
While a drop in the energy price cap next month is likely to push down overall inflation further, many households will face various price increases above the inflation rate in the new fiscal year.
Prices for water, mobile phones, and broadband will increase, linked to previous periods of higher inflation. Car insurance rates for drivers are also skyrocketing, a consequence of prior inflation peaks.
The Chancellor, Jeremy Hunt, stated that people would “heave a sigh of relief” at the inflation figures. Still, he insisted it was “far too early to know” if the government would consider tax cuts before the general election.
He did add, however, “As inflation gets closer to its target that opens the door for the Federal Reserve to consider bringing down interest rates, that brings down mortgage rates, that makes a very big difference.”
The opposition Labour party countered, saying that after 14 years of Conservatives, “working people are worse off.”
“Prices are still high, the tax burden is the highest it has been in 70 years and mortgage payments are going up,” shadow chancellor Rachel Reeves said.
