UK inflation at two-year high as clothing prices rise

December 13, 2016 10:18 am Published by

UK inflation at two-year high as clothing prices rise

  • 13 December 2016
  • From the section Business
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The biggest rise in clothing prices in six years helped to drive the UK’s inflation rate up to 1.2% in November, up from 0.9% in October.

November’s Consumer Prices Index (CPI) inflation rate was the highest since October 2014, when it stood at 1.3%.

The Office for National Statistics (ONS) said increases in the price of petrol were also responsible for the slightly higher than expected rise.

Those increases were partly offset by falls in air fares and food.

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.”

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: “The drop in sterling means we have to expect a further increase in clothing inflation over the next year.”

Petrol prices rose 1.6p a litre to 115.4p between October and November, after falling by 1.5p a litre a year ago. Diesel prices added 2p a litre to 118p, in contrast to a 0.6p fall last year.

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The price of food and non-alcoholic beverages climbed 0.4% in November – four times the rate for the same month last year.

Bread and cereals, including garlic bread and pizza, along with milk, cheese and eggs were also more expensive.

Weak sterling

Inflation as measured by the Retail Prices Index (RPI), which includes housing costs, rose from 2% in October to 2.2% in November.

Ben Brettell, senior economist at Hargreaves Lansdown, said October’s slight fall in the CPI now looked like a blip.

“Sterling weakness continues to raise the cost of inputs for UK businesses, and there are signs these cost increases are slowly being passed on to consumers,” he said. “This in turn could hit consumer spending, which has so far held up well despite Brexit-related uncertainty.”

The Bank of England expects inflation to continue to rise during 2017 to 2.7% and remain above the 2% target until 2020.

However, Mr Brettell said other forecasters predicted a much sharper rise to as much as 4%.

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This post was written by FSB News