Soaring prices are 'a taste of things to come'Comments Off on Soaring prices are 'a taste of things to come'
Shoppers were given a “taste of things to come” today as the Brexit squeeze on household wallets tightened in November thanks to rising clothing, petrol and food prices.
Official figures showed the Consumer Prices Index rising to a two-year high of 1.2% last month — higher than expected by City economists. The impact of the pound’s 15% fall since June’s poll is now hitting family budgets previously buoyed by ultra-low inflation.
“We are leaving behind the very favourable world of near-zero inflation which has benefited consumers over the past couple of years,” PwC’s senior economic adviser and former rate- setter Andrew Sentance said.
The data also showed the sharpest rise in manufacturers’ costs for nearly four years thanks to the drop in sterling as well as a rise in the oil price, which reached a 17-month high this week.
The latest signs of Brexit-inspired inflation are all but certain to prompt the Bank of England to keep interest rates on hold at 0.25% in their latest decision, due on Thursday. Governor Mark Carney has said rate-setters “could respond in either direction” if inflation shows signs of rising more quickly than expected, with summer hints of a further cut now firmly off the table.
Capital Economics’ Ruth Gregory said the figures were “a taste of things to come” as clothing prices saw the biggest November rise in six years.
Berenberg’s senior UK economist Kallum Pickering said: “After declining for almost three years on sterling strength, import costs have risen sharply.”
Drivers were also hammered at the petrol pumps, with fuel up 1.6p a litre on the month versus a similar-sized fall a year ago. Laptops and computers — priced in US dollars — are dearer and the weekly shop’s cost is rising at a faster rate than last year thanks to more expensive basics such as bread and milk.
Gregory added: “Though it will take some time before we see the full effects of sterling’s depreciation on consumer prices, the breakdown showed that components which typically respond more quickly to exchange rate movements, such as petrol and food prices, were a major upward influence on inflation.” Inflation is likely to be above the Bank’s 2% target by early spring and at 3% or higher by the end of next year, experts warn.
The ONS producer price figures also underlined the increasing cost pressures faced by the UK’s manufacturing base. The cost of raw materials is up 12.9% on last year, forcing up factory gate prices by 2.3% — the biggest rise since April 2012.
Firms are struggling against a 22% rise in crude oil costs and a 35% rise in imported metal costs over the last year — the biggest rise on record.