World Economy

UK Inflation Hits Two-Year High

UK Inflation Hits Two-Year HighUK Inflation Hits Two-Year High

UK 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 said the Consumer Price Index 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 penciling 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, RTE reported.

Sterling’s plunge to 31-year lows since Britain voted to leave the EU 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.”

 Fuel, Food Prices Up

The Retail Prices Index–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.

Rising fuel prices were also pushing up the cost of living, with petrol prices rising 1.6p per liter to 115.4p per liter between October and November, after falling by 1.5p per liter a year ago. Diesel prices also stepped up 2p per liter to 118p per liter 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.

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.

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