Clothing And Fuel Prices Spark Leap In Inflation Rate

Clothing And Fuel Prices Spark Leap In Inflation Rate
|

Inflation rebounded to a two-year high last month, driven by a hike in the price of clothes and fuel.

The Office for National Statistics (ONS) said the Consumer Price Index (CPI) measure of inflation hit a higher-than-expected 1.2% in November after easing back to 0.9% in October from 1% in September.

Economists had been pencilling in growth of 1.1%.

The ONS said a stronger performance from the pound last month took the edge off import prices for manufacturers despite total input costs climbing 12.9% in the year to November, compared to a 12.4% rise in October.

Sterling's plunge to 31-year lows since Britain voted to leave the European Union is expected to push up the cost of living as manufacturers pass on higher costs to consumers.

Mike Prestwood, ONS head of inflation, said: "November's slight rally in the value of sterling eased the inflationary pressure on businesses importing raw materials but consumer prices continued to edge upwards, due mainly to the rising cost of clothing and fuel."

The Retail Prices Index (RPI) - a separate measure of inflation, which includes housing costs - was 2.2% in November, up from 2% in October.

The main driver of the rise in CPI came from clothing and footwear price tags, which rose 1.6% between October and November this year, compared with a 0.1% fall over the period in 2015.

Retailers held fewer sales in November this year in contrast to last year, while the amount of clothes on sale in October was higher, the ONS said.

Rising fuel prices were also pushing up the cost of living, with petrol prices rising 1.6p per litre to 115.4p per litre between October and November, after falling by 1.5p per litre a year ago.

Diesel prices also stepped up 2p per litre to 118p per litre over the period in contrast to a 0.6p fall last year.

Food and non-alcoholic beverages also pushed higher, climbing 0.4% in November this year, compared with a 0.1% rise in the same month last year.

The move comes on the back of a jump in the price of bread and cereals, including garlic bread and pizza, with milk, cheese and eggs also becoming pricier.

Howard Archer, chief UK and European economist at IHS Global Insight, said November's rise to a two-year high confirmed that CPI's easing in October was only a "brief respite".

"It looks inevitable that consumer purchasing power will deteriorate markedly over the coming months as inflation moves appreciably higher and earnings growth is limited," he added.

"Companies will highly likely look to clamp down on workers' pay as they strive to save costs in a more difficult environment and as their imported input prices are lifted by the sharply weakened pound.

"Meanwhile, a likely softening labour market and consumer uncertainties will dilute workers' ability and willingness to push for higher pay awards despite rising inflation."

The Bank of England predicts inflation will nearly treble over the next two years, shooting up to 2.7% for 2017 and 2018.

A Treasury spokesman said: "The economy remains fundamentally strong with taxes cut for millions of working people and the employment rate at a record high.

"The Autumn Statement set out support for an economy that works for everyone, as we adjust to our new relationship with the EU."