Households feel food price pain
A painful rise in the cost of the weekly shop kept up the inflation pressure for struggling household budgets in November, giving more headaches for rate-setters at the Bank of England.
Rising food prices following sodden harvests over the summer offset relief for motorists from a sharp fall in petrol prices, keeping the Bank's preferred consumer prices index benchmark unchanged at 2.7 per cent in November. According to the central bank's latest forecasts, the CPI will remain above its 2 per cent target throughout 2013.
The price of everyday staples such as bread and vegetables is soaring, with food prices overall 3.9 per cent ahead of November last year following the worst wheat harvest in 25 years. Vegetables such as potatoes are up a stinging 8.1 per cent. The figures also took account of gas and electricity price rises for the first time with Scottish & Southern Energy's price rise, an effect which will worsen in December's inflation data.
The latest rise comes on top of the Chancellor's spending squeeze due to kick in next year, restraining increases in many benefits to 1 per cent. Osman Ismail, an economist at the Centre for Economics and Business Research, said: "The poorest will feel their disposable incomes squeezed especially tightly. Consumers will likely continue to see their spending power eroded by rising prices for quite some time, whether they are in work or out of work."
Economists also warned that stubbornly high inflation is tying the hands of Bank of England rate setters despite rising fears over the economy tumbling back into recession.
The cost of living looks set to resume its rise towards 3 per cent next year, adding to the jitters on the Bank's Monetary Policy Committee over extending its £375bn money-printing programme.
This comes despite warnings, not least from the Governor, Sir Mervyn King, that growth may fall back into negative territory for the October-December quarter.
IHS Global Insight's economist Howard Archer said: "Higher inflation is clearly contributing to reluctance within the Bank of England to do more quantitative easing in the near term at least."
Currency markets also bet against further money printing, pushing sterling to a two-month high of $1.625 following the figures.
Revealed: Devastating impact of 'bedroom tax' sees huge leap in demand for emergency hardship handouts for tenants
Notes from a small island: Is Sealand an independent 'micronation' or an illegal fortress?
You thought Ryanair's attendants had it bad? Wait 'til you hear about their pilots
Revealed: Eerie new images show forgotten French apartment that was abandoned at the outbreak of World War II and left untouched for 70 years
Chloe Johnson death: Family of five-year-old British girl who died in a pool at in Egypt's Sharm el-Sheikh resort 'angry' that more wasn't done to save her
- 1 Stoke City investigate 'religious abuse' after 'pig's head is found in Kenwyne Jones' locker'
- 2 Gove’s lesson: spare the comma, spoil the child
- 3 Ukip captures Labour fortress in South Yorkshire by-election
- 4 You thought Ryanair's attendants had it bad? Wait 'til you hear about their pilots
- 5 Join Ryanair! See the world! But we'll only pay you for nine months a year
BMF is the UK’s biggest and best loved outdoor fitness classes
Find out what The Independent's resident travel expert has to say about one of the most beautiful small cities in the world
Win anything from gadgets to five-star holidays on our competitions and offers page.
iJobs Money & Business
£550 - £600 per day: Orgtel: Fidessa Analyst / PM - Banking - London - Up to £...
£450 - £500 per day: Orgtel: Sourcing Manager - Banking - London - Up to £500p...
To be discussed at interview.: Queen Elizabeth's School: An experienced and ef...
£294.05 - £330.92 per day + 150 per day travel and accommodation: Orgtel: A le...