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UK inflation hits highest level in more than two years UK inflation hits highest level in more than two years
(about 1 hour later)
UK inflation climbed to 1.2% in November, the highest level in more than two years. UK inflation climbed to 1.2% in November, the highest level in more than two years, in a sign that the sharp fall in the value of the pound since the Brexit vote is fuelling a rise in the cost of living.
The rise in the consumer prices index, from 0.9% in October, was largely driven by higher petrol and clothing prices according to the Office for National Statistics.The rise in the consumer prices index, from 0.9% in October, was largely driven by higher petrol and clothing prices according to the Office for National Statistics.
November’s rate was the highest since October 2014. November’s rate was the highest since October 2014, and slightly above the 1.1% forecast by City economists.
The increase in the headline inflation rate will be taken as a sign that the sharp fall in the value of the pound since the June Brexit vote is starting to feed through to the cost of living. A weaker pound makes imports from abroad more expensive. Frances O’Grady, general secretary of the TUC, said rising inflation posed a threat to living standards in the UK.
“Working people are facing over a decade of lost wage growth, with rising prices hitting their pay packets again. The government needs to act fast to avoid another living standards crisis. That means a clear plan for Brexit that will protect jobs, pay and rights.”
Economists said the increase in the headline inflation rate suggested a weaker pound was pushing up consumer prices by making imports from abroad more expensive.
Alan Clarke, economist at Scotiabank, said: “There was a scattering of monthly increases for exchange rate sensitive components that were higher than the seasonal norm. This to me represents the early signs of the pound’s depreciation feeding into the inflation data. There is plenty more where that came from.”
Economists including those at the Bank of England have warned that inflation is likely to rise sharply in 2017, to about 3%, putting increased pressure on household finances.Economists including those at the Bank of England have warned that inflation is likely to rise sharply in 2017, to about 3%, putting increased pressure on household finances.
More details soon ... Richard Lim, chief executive at the consultancy Retail Economics said retailers faced a choice between passing rising costs on to consumers, taking a hit on margins, or passing them on elsewhere in the supply chain.
“Most retailers will use a combination of all three to distribute the impact of rising input costs but households will have to share some of the pain,” he said. “How much pain and how quickly it feeds through will be critical in determining the strength of spending next year.”
Household finances are expected to come under mounting pressure in 2017, as higher inflation coincides with a period of weak wage growth, rising unemployment and weaker economic growth.
Higher prices of winter coats were largely behind a 1.6% increase in the cost of clothing between October. Petrol prices increased by 1.6p a litre between October and November this year, but fell by 1.5p a litre a year ago.
ONS figures also showed the prices paid by manufacturers for materials and energy continued to rise at a brisk pace on a year ago. They were up 12.9% from November 2015, the biggest rise for five years. They appeared to pass some of that on to clients, with output prices up 2.3% in November on a year ago, the biggest rise since April 2012.
The ONS said recent moves in the pound had fed through into measures of firms’ costs and charges made to their customers and “to a lesser extent” into some components of the consumer prices index that tend to be imported, such as fuel. Statisticians also said the drop in the pound had amplified the effect on inflation from a rise in global oil prices.
Responding to the inflation data, a spokesman for the Treasury 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.”