Record surge in food and clothing costs drives up inflation

Click to follow

A record surge in both food and clothing costs drove up the rate of inflation in November, official figures revealed today.

The Consumer Prices Index (CPI) rate of inflation was 3.3% last month, up from 3.2% in October, the Office for National Statistics (ONS) said.

The increase was driven by a 1.6% rise in food prices and 2% in clothing costs - the highest increases for both sectors in an October to November period since records began.

The figures will disappoint the Bank of England - tasked with bringing the rate of inflation down to a 2% target - although policymakers did predict a spike in the cost of living towards the end of the year.

The Bank has battled with stubbornly-high inflation all year, but is convinced it is driven by temporary price shocks, such as volatile food and petrol costs.

The Monetary Policy Committee (MPC) has resisted lifting interest rates from a historic low of 0.5% to curb inflation, as the economic recovery in the UK slows down.

The rise in food prices was driven by an increase in flour, breakfast cereals and poultry costs.

The ONS said there was anecdotal evidence to suggest crop problems seen in countries including Russia earlier this year could be contributing to the rise in food costs.

Droughts and wildfires in Russia over the summer led to the country introducing an export ban on grain and wheat. Commodity experts predicted the ban would eventually see increasing costs passed on to the consumer.

The City had predicted clothing prices to hold or even decrease in November, as retailers introduced discounts earlier than expected.

But today's figures reveal the cost of garments increased, including men's casual jackets, men's casual short-sleeve shirts and women's formal wear.

The higher cost of cotton - now at a 15-year-high - could explain the rising clothing prices, the ONS said.

Retailers, including Next and Primark owner Associated British Foods, have recently warned that soaring cotton costs are likely to be passed on to customers in the months ahead.

The main downward pressures on inflation between October and November came from recreation and culture, air transport and petrol, the ONS said.

Air fares were down 6.4%, driven by a drop in prices on European routes, the ONS said.

Petrol rose by 1.6% in the period - compared to 2.8% last year - which reflects a rise of 1.8p per litre.

Other measures of inflation also increased.

The headline rate of Retail Prices Index of inflation now stands at 4.7%, up from 4.5% last month.

Jonathan Loynes, chief economist at Capital Economics, said the Bank may be forced to raise interest rates earlier than expected if inflation stayed above target.

He added: "There is a clear concern that core price pressures are simply not responding to the apparent spare capacity in the economy in the way that the MPC - and we - had expected.

"There is no reason for the committee to panic at the moment. But if inflation refuses to fall and inflation expectations eventually start to respond, it may be forced to tighten monetary policy just as the biggest fiscal squeeze for decades is hitting the economy."

Comments