British inflation hit its highest rate in more than two years in November, pushed up by more expensive clothing and the effect of June’s Brexit vote on the prices consumers paid for technology goods.
Consumer prices were 1.2% higher than a year earlier in November, up from 0.9% in October and the biggest increase since October 2014, the Office for National Statistics (ONS) said on Tuesday. Economists polled by Reuters had expected a 1.1% annual rise in a Reuters poll.
In a separate release, the office said prices paid by British factories for materials and energy fell more than 1% on the month but were up by nearly 13% compared with November 2015 — the biggest annual increase since October 2011.
The Bank of England (BoE) forecast in November that inflation would surge to about 2.8% by mid-2018, as sterling’s plunge after Britain’s vote to leave the EU pushed up the cost of imports and squeezed living standards and household spending.
Sterling is currently down about 15% against the dollar and 8% against the euro, making suppliers and retailers battle for profits as imported goods become more expensive.
There was some respite for sterling in November, which eased the pressure on factories paying for materials and energy during the month.
Annual rates of producer price inflation rose at the fastest pace in more than four years, however, underscoring how British inflation more broadly looks set to rise sharply next year.
“We expect inflation could hit 3% next year against a backdrop of rising unemployment and weaker wage growth,” said Richard Lim, the CE of consultancy Retail Economics.
Sterling touched a day’s high above $1.27 after the data.
British inflation has been below the BoE’s 2% target for nearly three years and last year it was zero, the lowest level since comparable records began in 1950.
BoE policy makers look set to keep interest rates on hold this Thursday after dropping their signals of another cut and adopting a neutral stance in November.
Clothing prices provided the biggest boost to the annual inflation rate in November, in part because retailers offered fewer discounts.
Prices for recreation and culture rose by 0.5% from October to November, fuelled by higher costs for technology goods. Manufacturers such as Apple have increased prices in Britain to reflect the fall in the value of sterling since the Brexit vote.
The Office for National Statistics said consumers had to pay 7.4% more for fuel compared with a year ago — a trend that looks likely to continue.
On Monday oil prices rose by as much as 6.5% to an 18-month high after Opec members and some of their rivals reached a first deal since 2001 to jointly reduce output to try to tackle global oversupply and boost prices.
Reuters