If current trends continue, Jones noted, the case for a December interest rate cut looks "increasingly compelling."
LONDON, Nov. 22 (Xinhua) -- Britain's consumer price index (CPI) rose 3.6 percent in October 2025, easing slightly from the 3.8-percent joint-highest rate since January 2024 recorded in July, August and September. But the modest slowdown is widely viewed as insufficient to revive confidence, as households and firms brace for next week's pivotal yet uncertain Budget amid a weakening economic outlook.
CONSUMER MORALE ERODES
Julian Jessop, economics fellow at the Institute of Economic Affairs, said the October decline largely reflected favourable base effects in domestic energy prices. "Overall, there is little here to change anybody's mind about the outlook for inflation," he said.
Fresh data released Friday by the Office for National Statistics (ONS) underscored the pressure on households. Retail sales fell 1.1 percent in October, the first monthly decline since May.
Meanwhile, the consumer confidence index, jointly released by market research agency GfK and its founder Nuremberg Institute for Market Decisions, dropped 2 points to -19 in November. All key components, including views on the economic outlook, personal finances and major purchases, weakened.
"This is a bleak set of results as we head towards next week's Budget," said Neil Bellamy, GfK's consumer insights director. "A fall across all five measures suggests the public is bracing for difficult news."
Helen Dickinson, chief executive of the British Retail Consortium (BRC), said Budget speculations had unsettled shoppers. "Strong hints by government earlier this month of income tax rises heightened public concern about their own finances and the wider economy, though government has since rowed back," she said. "With Christmas fast approaching, public expectations of spending, both on non-food retail goods and across wider spending, fell."
The BRC reported that consumer expectations for the economy over the next three months plunged to -44 in November, from -35 in October. Its director of insight, Kris Hamer, urged the government to reduce business rates to help retailers keep price pressures in check for households.
BUSINESS SENTIMENT SUBDUED
Business confidence has followed a similar downward trajectory. In its latest quarterly survey of 4,600 firms, mostly small and medium-sized enterprises, the British Chambers of Commerce (BCC) said sentiment has fallen back to 2022 levels and has not recovered since the previous Budget. Only 48 percent of companies expect turnover to rise in the next 12 months, down from 58 percent at the start of 2024.
Stuart Morrison, research manager at the BCC, said the national insurance hike announced in last year's Budget "has fueled inflation, hit investment and damaged job opportunities." "The Chancellor must use her statement next Wednesday to ease the cost burden for business, not add to it. In short, no more tax on business," he added.
The upcoming autumn Budget will play a pivotal role in shaping the UK's economic trajectory, affecting corporate planning and household demand for years, according to BCC head of research David Bharier, and Benjamin Caswell, senior economist at the National Institute of Economic and Social Research. Higher corporate or payroll taxes would directly hit firms, while increases in income or consumption taxes would weaken household spending, they warned.
"The Chancellor needs a few rabbits from the Budget hat next week to bolster weak consumer and business confidence -- both essential for economic growth," said Dickinson.
INTEREST RATE CUT EXPECTED
The slight easing in inflation has strengthened expectations that the Bank of England (BoE) will cut interest rates in December, after holding its benchmark rate at 4 percent earlier this month.
Goods, services and core inflation all moderated in October, said Anna Leach, chief economist at the Institute of Directors, although food inflation edged higher. With the growth outlook weakening, she said the BoE's Monetary Policy Committee (MPC) now appears more likely to reduce rates.
Ben Jones, lead economist at the Confederation of British Industry, also said the decline in price growth, combined with the weak third-quarter GDP data and a softening labor market, reinforced the evidence that underlying price pressures are steadily subsiding.
According to ONS data released on Nov. 13, the British economy slowed again in the third quarter, with real GDP rising only 0.1 percent, down from 0.3 percent in the previous quarter and sharply below the 0.7 percent expansion at the start of the year.
If current trends continue, Jones noted, the case for a December interest rate cut looks "increasingly compelling."