ONS UK CPI Inflation (December 2024): UK CPI inflation slowed from 2.6% in November to 2.5% in December. In theory, this is a marginal change at most. However, in practical terms, given the concern in financial markets at the start of this year around government borrowing levels and rates plus UK economic growth and whether the UK would enter a period of stagnation with higher interest rates for longer, financial markets will be closely watching each monthly data point on inflation and GDP in the first half of 2025.

The slowdown in CPI inflation was better than the markets’ expectations of inflation remaining at 2.6%. It may have a slight calming effect on financial markets’ concerns, but this is likely to be temporary until the next monthly data point from CPI inflation, GDP or PMI surveys. It is worth noting that we still have not seen the impact of the National Living Wage rise or the employers’ National Insurance Contribution increases and the falling thresholds on wage costs. Hence, inflation and the financial markets are likely to remain volatile and (over)reactive to each UK economic data point as they are published.

I'm interested in:

• Construction Products Association
• CPA