Changing fortunes

Inflation in the UK peaked at a budget-busting 11.1% in October 2022, the highest in over 40 years.

INFLATION

But the surge began to ease in 2023 and by the start of 2024 the consumer prices index measure of living costs was down to 4%.

But within even that, some of the things families buy most often continued to soar in price. The cost of food and drink was one example.

It started the year rising at a rate of 8%, while clothing and footwear remained over 6% more expensive than the January before.

Fast forward to now and inflation stood at 2.3% in October, with the Office for National Statistics due to give an update tomorrow. To show we are not out of the woods, the rate was up from 1.7% in September, driven by higher energy bills.

Experts are split on what will happen to inflation next year. Some are forecasting upward pressure from April's changes to employers' national insurance could feed through to price rises. The Bank of England (pictured above) thinks it is likely to edge up to about 2.75% in the second half of 2025 before falling again.

WAGES

Easing inflation has come amid a rise in earnings, which theoretically should leave families with more money to spare.

Average regular pay, excluding bonuses, increased by 4.8% between July and September, according to the Office for National Statistics.

In real terms, adjusted for inflation, regular pay increases stood at around 1.9%.

What happens to pay could depend on the health of the jobs market and the willingness of employers to fund increases.

Feedback to the Bank of England suggests firms are expecting to dish out pay awards in 2025 in the range of around 2% to 4%.