UK inflation climbs to 1.2% in November, hits 2-year high
UK inflation climbed to 1.2% in November, the highest level in more than two years, in a sign that the 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.
November’s rate was the highest since October 2014, and slightly above the 1.1% forecast by City economists.
Frances O’Grady, the TUC general secretary, 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 rise in the headline inflation rate suggested a weaker pound was pushing up consumer prices by making imports 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.
Richard Lim, chief executive at the consultancy Retail Economics, said shops 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.”
Higher inflation in 2017 is expected to coincide with a period of poor wage growth, rising unemployment and weaker economic growth all adding to the pressure on household finances.