UK Inflation Rises Again

14 December 2016 11:11:41 AM


Inflation in the UK has continued to pick up, measured by both the Consumer Price Index (CPI) and the Retail Price Index (RPI) yardsticks. Many in the UK who have seen the price of weekly shopping and fuel rise in recent weeks will be surprised that the CPI has “just” risen to 1.2% last month from a level of 0.9% in October (the values are relative to costs twelve months ago which may explain the difference between consumers’ experiences and the ONS statistics, or not). The rise takes the CPI value to its highest level since October 2014 when it stood at a dizzying 1.3%. Given that the UK imports a large proportion of consumer products, at some stage the weakness of Sterling will be factored into High Street prices, causing inflation to spike. Some analysts are suggesting that the fall in Sterling will start to push up inflation figures in February or March.

The latest increase in the cost of living has been blamed on dearer clothing prices which have increased at their fastest rate for six years. November 2015 was unseasonably mild and clothing retailers were forced to discount winter merchandise to coax snug consumers to part with their cash. Another factor nudging prices up was higher petrol costs which rose by 1.6p a litre to take petrol to an average figure of 115.4p per litre. The fuel price is derived from crude oil prices in Dollars and so will rise if the fall in the value of Sterling is passed on, but also the recent agreement by Opec and other crude oil producers to reduce output has resulted in higher price for black gold, so the Dollar price itself has increased. The price for diesel also increased.

Food and (soft) drinks are also more expensive than a year ago, having risen by 0.4% compared to a 0.1% rise in November 2015.

According to the Bank of England, inflation is expected to hit 2.7% next year and remain above the 2% target figure until 2020 – these predictions are a hostage to Brexit fortune, of course. Other analysts expect inflation to hit 4% next year, but until details of Brexit become clearer, nobody can have a truly informed opinion – a hard Brexit will trigger a fresh Sterling crash which will force up the cost of imported goods to the UK.

Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.

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