Inflation rises to 1.2 per cent

The biggest rise in clothing prices in six years has driven the UK’s inflation rate up to 1.2 per cent in November, up from 0.9 per cent in October.

November’s Consumer Prices Index (CPI) inflation rate was the highest since October 2014, when it stood at 1.3 per cent.

The Office for National Statistics (ONS) said increases in the price of petrol were also responsible for the slightly higher than expected rise.

Those increases were partly offset by falls in air fares.

The Scottish Chambers of Commerce (SCC) warned that higher prices will increase business costs and dampen demand, resulting in an urgent need to tackle high business rates bills.

Liz Cameron, chief executive of SCC, said: “Inflation is again on the rise and this is likely to continue in 2017, with both the Bank of England and Office of Budget Responsibility projecting that it is likely to hit 2.7 per cent during the next year, exceeding the government’s 2 per cent target.

“The problem for businesses is that this will contribute to rising costs at the same time as the rising cost of living will put pressures on consumer demand. That is why Government at all levels must now urgently look at what can be done to tackle the cost of doing business. Here in Scotland, one of the major costs faced by many businesses is business rates and the Scottish Government has a golden opportunity in its Budget this week to tackle rising rates costs and provide a boost to business just when it is most needed.”

Mike Prestwood, ONS head of inflation, 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.”

Martin Beck, senior economic advisor to the EY ITEM Club, said: “Following October’s dip in annual CPI inflation, November saw price pressures return to a rising trend. A rise in clothing and footwear prices played the biggest role in pushing inflation up, with fuel prices and the cost of recreational equipment such as computers also making a positive contribution. More broadly, the price of goods, which have previously been a source of deflation, rose on an annual basis for the first time since October 2014.

“With inflation now within one percentage point of the MPC’s target, the Governor will no longer have to write to the Chancellor explaining the Committee’s miss. Moreover, increasing evidence of inflationary pressures building along the pricing pipeline means that the Governor’s pen can safely be put away for some time to come. Spurred by sterling’s depreciation, input prices surged by 12.9% in November (compared to a decline of 13.1% in the same month last year), while factory gate prices increased by 2.3%, not far off a five-year high.

“We continue to expect that CPI inflation will rise to close to 3% by the middle of next year, squeezing household incomes and playing the key role in an anticipated slowdown in economic growth.”