Energy price hikes send inflation to six-month high – with more pain to come

 

Soaring energy bills are set to push the cost of living to a six-month high in figures due this week.

The Consumer Prices Index is expected to have risen for the second month in a row to 2.8 per cent in November, continuing the upward trend in prices fuelled by October's surge in tuition fees.

The biggest factor behind the rise will be the average 9 per cent rise in gas and electricity bills being pushed through by the big six energy firms. Scottish & Southern Energy was the first to move in mid-October, although the price rise came through too late to be counted in the October inflation numbers.

The rise comes just as Britons are cranking up the heating to weather a cold snap. Campaigners warn that the six million households currently in fuel povery – defined as spending more than 10 per cent of income on energy – is set to grow to 9.1 million households as prices increase.

The Office for Budget Responsibility has meanwhile pencilled in more pain for households next year with further above-inflation rises on gas and electricity bills built into its forecasts.

The increase should more than offset a 2.5 per cent fall in average petrol prices over the month, according to Deutsche Bank's chief UK economist George Buckley.

He also warned that shopping baskets may soon feel the effects of a 10 per cent rise in commodities such as wheat and sugar over the summer. "There's generally a lag of around six or seven months," he said.

Mr Buckley predicts the CPI is likely to continue its climb higher next year before breaching the 3 per cent mark next summer.

"One of the first jobs that the new Bank of England Governor Mark Carney might have to do is write a letter to the Chancellor to explain high inflation," he added.

The Office for National Statistics will also publish its second revision of growth for the July-September quarter, expected to be left unchanged at 1 per cent. Prospects for the final quarter are more uncertain as many experts predict an Olympic hangover and a fresh contraction for the economy.

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