UK inflation levels slowed faster than expected, dropping to 10.1% in January from 10.5%, however non-essential spending is expected to continue to weaken among consumers.

According to the latest data from the Office for National Statistics, the consumer price index for food and non-alcoholic beverages also saw a slight dip of 0.1% to 16.8% last month.

However across alcohol and tobacco, inflation levels rose to 5.2%, up from 3.8% in December 2022.

According to McKinsey & Company partner and global leader of the Consumer Pricing Practice, Kevin Bright said: “Persistently high prices continue to impact households.

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“The CPI at 10.1% remains stubbornly high, driven particularly by continued high inflation in energy, gas and other services (89.5%) and food and non-alcoholic beverages (16.7%).”

He said that as a result, “non-essential spending will likely continue to be weaker as higher monthly outgoings continue to weigh heavily on households,” with consumers looking to “adapt their purchasing behaviour, looking for deals, shifting to lower prices alternatives and deffering large purchases.”

Bright added that as retailers find it “hard” to manage high inflation levels, “persistently high inflation is harder still.”

“Retailers are caught in the middle – tackling a steep jump in supplier costs on the one hand and struggling to maintain sales on the other.”

He said looking ahead, retailers “should consider taking a long-term holistic approach, and look for opportunities to improve productivity, invest in transformation and make strategic moves to shore up their balance sheets.”