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Inflation at near two-year high amid rise in clothing prices

Published 18/10/2016

Inflation hit a higher-than-expected 1.0% in September, figures show
Inflation hit a higher-than-expected 1.0% in September, figures show

Inflation has jumped to a near two-year high as the rising cost of clothes, restaurants and hotels pushed up the cost of living.

The Consumer Price Index (CPI) inflation hit 1.0% in September, rising from 0.6% in August, and beating economist forecasts of 0.9%.

It marks the highest inflation rate since November 2014.

The Office for National Statistics (ONS) said there was "no explicit evidence" that sterling's near 20% slump since the Brexit vote had impacted prices.

Mike Prestwood, head of inflation at the ONS, said: "CPI inflation has risen to its highest for nearly two years, though it remains low by historic standards.

"The prices paid by manufacturers for raw materials were unchanged over the month and there is no explicit evidence the lower pound is pushing up the prices of everyday consumer goods."

The main upward pressure on CPI came from a jump in clothing and footwear price tags - especially women's clothes - with garments rising 6% between August and September, compared to a 3.3% rise over the same period last year.

The ONS said the "relatively large" increase in clothing prices was in line with seasonal trends and not triggered by the post-Brexit vote sterling slump, but explained that some firms had measures in place to protect against short-term exchange rate volatility.

Restaurant and hotel prices also increased the cost of living, rising 0.7% between August and September compared to 0.2% last year.

Petrol prices climbed by 1.2 pence per litre month-on-month to 111.2 pence, while diesel prices increased by 1.5 pence per litre to 113.3 pence over the period.

However, food prices remained under pressure, dropping 0.3% between August and September, compared with a 0.1% rise last year.

Prices at supermarket checkouts have continued to fall as Britain's Big Four grocers remain engaged in a price war following the rise of German discounters Aldi and Lidl.

Food prices came into sharp focus last week when Tesco and Unilever became locked in a Mexican stand-off over a potential 10% price hike on key products including Marmite and Persil following the collapse in sterling.

Unilever later said the dispute had been resolved, but warned that consumers would still have to stomach more pain in the new year.

The Bank of England said on Friday that it was willing to allow inflation to run "a bit" higher next year than its 2% target if it safeguarded jobs and boosted economic growth.

Andrew Sentance, PwC's senior economic adviser, said the jump in the cost of living was only the beginning, with further price rises expected in the months ahead.

"This latest rise... is just the tip of the inflationary iceberg which is coming our way."

He added: "Over the course of next year, we should expect inflation to rise above the Bank of England's 2%. This will squeeze household spending power and add to the slowdown in the economy in 2017."

Press Association

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