Spending triggers inflation fears

Buoyant consumer spending is bringing the threat of higher inflation and imports, while the strong pound has started to hit exports. So official figures on retail prices and the latest CBI survey of industry suggested yesterday.

Rising prices on the high street meant the target measure of inflation did not edge down in November, disappointing some economists. Many believe interest rates should go up if the Government wants to hit its inflation target. Separately, the CBI reported that the rise in the exchange rate had taken export orders to their lowest for nearly three years. It predicted a ballooning balance of payments deficit next year.

"It is a weaker form of the classic British pattern of rising inflation and a balance of payments gap, although we do have a better performance by UK companies now," said Sudhir Junankar, a CBI economist.

Eddie George, Governor of the Bank of England, speaking in Lisbon the evening after Wednesday's monetary meeting, repeated his view that base rates need to rise. "The sooner the question is addressed, the better," he said, although he added that rates would not have to go much higher.

Most City experts believe that although the Governor did not persuade Kenneth Clarke to take his advice this week, the Chancellor will be forced to act in January or February.

The Treasury said November's 3.3 per cent inflation on the target measure was likely to fall during the next few months, as a period of falling prices last year dropped out of the 12-month rate.

However, the details of yesterday's figures suggested that retailers might be trying to increase their margins in the face of strong consumer demand. Prices for household goods increased by 1 per cent during the month, and clothing and footwear prices were up 1.1 per cent following a record 5.2 per cent increase in September.

The price of leisure goods increased by 0.6 per cent. Motoring costs fell in November, but not as much as a year earlier. Service prices rose little during the month but are trending upwards.

Lower food prices off-set much of the damage, falling 0.4 per cent during November to a level only 1.5 per cent above a year earlier. Meat prices fell sharply, especially pork and poultry, reversing some of the big increases triggered by the beef crisis.

Concerns about inflation were increased by a jump in the balance of manufacturers planning to raise their prices, from 8 per cent to 12 per cent. The CBI's survey showed price expectations have jumped to their highest since March after several extremely subdued months.

"Manufacturers seem to have set their heart on new year price rises," said John O'Sullivan at NatWest Markets.

Start your day with The Independent, sign up for daily news emails
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Guru Careers: Communications Exec / PR Exec

£25 - £30K: Guru Careers: We are seeking a highly-motivated and ambitious Comm...

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

Day In a Page

On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific
In this the person to restore our trust in the banks?

In this the person to restore our trust in the banks?

Dame Colette Bowe - interview
When do the creative juices dry up?

When do the creative juices dry up?

David Lodge thinks he knows
The 'Cher moment' happening across fashion just now

Fashion's Cher moment

Ageing beauty will always be more classy than all that booty
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination

Health fears over school cancer jab

Shock new Freedom of Information figures show how thousands of girls have suffered serious symptoms after routine HPV injection
Fifa President Sepp Blatter warns his opponents: 'I forgive everyone, but I don't forget'

'I forgive everyone, but I don't forget'

Fifa president Sepp Blatter issues defiant warning to opponents
Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report

Weather warning

Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report
LSD: Speaking to volunteer users of the drug as trials get underway to see if it cures depression and addiction

High hopes for LSD

Meet the volunteer users helping to see if it cures depression and addiction
German soldier who died fighting for UK in Battle of Waterloo should be removed from museum display and given dignified funeral, say historians

Saving Private Brandt

A Belgian museum's display of the skeleton of a soldier killed at Waterloo prompts calls for him to be given a dignified funeral