UK inflation hits five year high

The UK’s inflation rate equalled its highest rate in more than five years last month on the back of price rises of petrol and clothing, and compounded by the continued fall in the value of sterling.

UK inflation measured by the Consumer Prices Index rose to 2.9 per cent in August, up from 2.6 per cent in July, data from the Office for National Statistics showed.

The rebound in the price of oil pushed up fuel prices but the prices of most goods climbed during August, largely because of rising import costs for retailers.

Clothing and footwear prices had the biggest impact, climbing 4.6 per cent year-on-year, their highest level since records began.

Petrol pushed the overall cost of living higher still, increasing 1.8p a litre to 115.7p during the month, while diesel gained 2p to 117.6p.

The bigger-than-expected rise in inflation comes ahead of the Bank of England’s next announcement on interest rates on Thursday.

However, economists said the Bank was still highly unlikely to raise rates at the meeting.

Liz Cameron, chief executive, Scottish Chambers of Commerce, said: “These latest figures which show that inflation has increased can be largely attributed to the rising price of clothing and footwear, with the import-intensive nature of the industry and the exchange rate pressure which arises through the supply chain, driving the increase.

“Additionally, prices at the factory gate are increasing and with CPI inflation continuing to outpace pay increases, this will raise some concerns for businesses when it comes to the availability of consumer spending. We are hearing early signs from members, although not widespread, of increasing costs being passed down the supply chain and potentially to the end consumer.

“With this in mind, and with only modest GDP growth, the Bank of England should hold steady on raising interest rates.”