UK inflation jumps – house price growth eases
The UK Consumer Price Index has risen to its highest level since October 2014 while house price inflation has continued to decrease, according to figures from the ONS.
13 December 2016Inflation in the UK rose to a two-year high in November as the fall in the value of the pound began to feed through into prices.Data from the Office for National Statistics (ONS) showed the Consumer Price Index had risen to a higher-than-expected 1.2 per cent last month, up from 0.9 per cent in October and the highest figure since October 2014.The main reason for the rise was a jump in the cost of clothing and fuel, with petrol prices rising by 1.6p a litre over the month and diesel going up by 2p, mainly due to "depreciation of sterling against the US dollar", said the ONS.The fall in the value of sterling since the Brexit vote also resulted in a steep, year-on-year rise of 12.9 per cent in the cost of materials and fuels imported in November by UK manufacturers.Mike Prestwood, head of inflation data at the ONS, 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."According to forecasts from the Bank of England, the CPI measure of inflation will nearly treble over the next two years, rising to 2.7 per cent by 2018.
Howard Archer, chief UK and European economist at IHS Global Insight, said November's rise in the index showed that the lower-than-expected rate in October only represented a "brief respite". He added, "It looks inevitable that consumer purchasing power will deteriorate markedly over the coming months as inflation moves appreciably higher and earnings growth is limited."Companies will highly likely look to clamp down on workers' pay as they strive to save costs in a more difficult environment and as their imported input prices are lifted by the sharply weakened pound."Meanwhile, a likely softening labour market and consumer uncertainties will dilute workers' ability and willingness to push for higher pay awards despite rising inflation."The Trades Union Congress described the latest rise in inflation as illustrative of the threat to living standards as working families faced up to the realities of more than a decade of below-inflation pay rises.However, a spokesman for HM 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."Meanwhile, figures from the ONS on property values showed that house price inflation across the UK continued to ease, with the annual rate decreasing from seven per cent in September to 6.9 per cent in October.It meant that the average price remained at £217,000, although there were marked regional variations with the biggest increases being recorded in the London commuter belt – both Basildon and Slough saw annual rises in excess of 19 per cent – while falls of 8.8 per cent were recorded in the City of London, 8.7 per cent in Aberdeen and 4.9 per cent in Kensington and Chelsea.
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Howard Archer, chief UK and European economist at IHS Global Insight, said November's rise in the index showed that the lower-than-expected rate in October only represented a "brief respite". He added, "It looks inevitable that consumer purchasing power will deteriorate markedly over the coming months as inflation moves appreciably higher and earnings growth is limited."Companies will highly likely look to clamp down on workers' pay as they strive to save costs in a more difficult environment and as their imported input prices are lifted by the sharply weakened pound."Meanwhile, a likely softening labour market and consumer uncertainties will dilute workers' ability and willingness to push for higher pay awards despite rising inflation."The Trades Union Congress described the latest rise in inflation as illustrative of the threat to living standards as working families faced up to the realities of more than a decade of below-inflation pay rises.However, a spokesman for HM 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."Meanwhile, figures from the ONS on property values showed that house price inflation across the UK continued to ease, with the annual rate decreasing from seven per cent in September to 6.9 per cent in October.It meant that the average price remained at £217,000, although there were marked regional variations with the biggest increases being recorded in the London commuter belt – both Basildon and Slough saw annual rises in excess of 19 per cent – while falls of 8.8 per cent were recorded in the City of London, 8.7 per cent in Aberdeen and 4.9 per cent in Kensington and Chelsea.
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