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The Actuary The magazine of the Institute & Faculty of Actuaries

Inflation highest recorded for more than two years

UK consumer price inflation is rising at the highest rate seen since October 2014 according to figures from the Office for National Statistics (ONS) released today.

Expected to continue to rise over next few months ©Shutterstock
Expected to continue to rise over next few months ©Shutterstock

Their monthly Consumer Prices Index shows that inflation rose to 1.2% in November compared to a 0.9% rise in October, largely due to the highest increase in clothing prices for six years.

Although this higher rate is not expected to impact too heavily on spending around the festive period, it is believed it may do in the coming months following the fall in value of sterling.

The Share Centre, investment research analyst, Graham Spooner, said: “What is most important is that UK consumers, especially just ahead of the biggest and most crucial spending period of the year, are unlikely to feel restricted in their spending.

“However, on reflection for the year ahead, rising inflation may start to effect spending patterns.

“This latest piece of data confirms the widely held expectation that the weaker pound is having a notable impact, and so it remains likely that consumer inflation will continue to rise over the next few months.”

Additional rises in the prices of motor fuels, footwear, furniture, and data processing equipment, were the other main contributors to the increased inflation rate.

The largest downward pull on inflation in November, and for 2016 to date, comes from prices for food and non-alcoholic beverages, while all prices in broad categories rose.

Consumer inflation rate for the last 10 years:

Source: ONS
Source: ONS

The Bank of England have forecast inflation to rise to 2.7% next year, although some analysts have predicted it will reach as high as 4%.

This, coupled with uncertainty following the UK’s Brexit vote, has led to the Trade Union Congress (TUC) calling for government action.

TUC general secretary Frances O’Grady said: “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.

“And we need a quick end to the unfair public sector pay cap, which will see public sector workers face year-on-year cuts to real pay.”