Inflation rises to 1.2% in November

UK inflation – the measure of the increase in prices of a selected ‘basket of goods’ that includes items and services that are commonly bought by the average person in the UK (and is updated each year) – rose to 1.2% in November, 0.3% higher than October’s 0.9% number.

Today’s figure, which is taken from the Consumer Price Index (CPI) rate of inflation, has hit a 25-month high – although to put it in context, it’s still down on the Bank of England’s (BoE) 2% target for 2017.

The main drivers of the increase include rising clothing, fuel, hotel, and restaurant prices.
However, rising inflation – in particular food prices – is a major concern for over half of UK households in a post-Brexit Britain.

Tom Stevenson, investment director for personal investing at Fidelity International, says: “Higher inflation means the pound in your pocket won’t stretch as far and many will be thinking how they can make their money work harder. There is little evidence so far that rising inflation will translate into much higher interest rates, so anyone with savings still sitting in cash will struggle to generate real returns.”

 

Some experts believe inflation will climb ever higher as 2017 proceeds, but Ben Brettell, senior economist at Hargreaves Lansdown disagrees.

He says: “The longer-term picture is one of structurally low inflation – due in part to demographic reasons. The baby boomers are starting to retire and have already gone through their consumption phase – they have bought their houses, cars and consumer goods. The generation behind them is saddled with debt and struggling to get on the housing ladder. Workers don’t have the bargaining power over pay they once did, and wage growth looks set to be anaemic at best.”

The Retail Price Index (RPI), which unlike CPI does include housing costs, rose from 2% in October to 2.2% in November.

Published: 13 December 2016
Last updated: 13 December 2016

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