Inflation jumps to highest level in almost two years

Consumers saw prices rise at the fastest pace in almost two years last month. Picture: John Devlin
Consumers saw prices rise at the fastest pace in almost two years last month. Picture: John Devlin
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Inflation has jumped to a near two-year high as the rising cost of clothes, restaurants and hotels pushed up the cost of living.

The consumer prices index (CPI) measure of inflation hit a higher-than-expected 1 per cent in September – the same level as November 2014 and up from 0.6 per cent the previous month. Economists had pencilled an increase to 0.9 per cent.

The Office for National Statistics (ONS) said there was “no explicit evidence” that sterling’s slump following the Brexit vote had pushed up prices of consumer goods. The value of the pound has fallen almost 20 per cent against the US dollar since Britain voted to leave the European Union.

READ MORE: Think-tank warns of ‘squeezed incomes’ as inflation rises

The retail pricess index (RPI) – a wider measure of inflation that includes housing costs – rose to 2 per cent last month, up from 1.8 per cent in August.

Mike Prestwood, head of inflation at the ONS, said: “CPI inflation has risen to its highest for nearly two years, though it remains low by historic standards.

“The prices paid by manufacturers for raw materials were unchanged over the month and there is no explicit evidence the lower pound is pushing up the prices of everyday consumer goods.”

The main upward pressure on CPI came from a jump in clothing and footwear price tags – especially women’s clothes – with garments rising 6 per cent between August and September, compared with a 3.3 per cent rise over the same period last year. Overall clothing prices rose by 5.5 per cent month-on-month in September.

The ONS said the “relatively large” increase in clothing prices was in line with seasonal trends and not triggered by the drop in the value of the pound following the EU referendum result. It added that firms had measures in place to protect against short-term changes in the exchange rate.

The cost of living was also impacted by price rises at restaurants and hotels, up 0.7 per cent between August and September, compared to 0.2 per cent a year ago. The cost of an overnight stay in a hotel rose month-on-month in contrast to a fall last year.

Petrol prices climbed by 1.2p per litre month-on-month to 111.2p, while diesel prices increased by 1.5p to 113.3p a litre over the period.

READ MORE: Martin Flanagan: Depressed pound opens up a can of worms

However, food prices remained under pressure, dropping 0.3 per cent between August and September, compared with a 0.1 per cent rise last year.

Prices at supermarket checkouts have continued to fall as Britain’s “big four” grocers remain engaged in a price war following the rise of German discounters Aldi and Lidl.

Food prices came into sharp focus last week when Tesco and Unilever became locked in a stand-off over a potential price hike on key products.

Britain’s biggest supermarket was left grappling with a shortage of store cupboard staples – including Marmite, Pot Noodle and Persil – after reportedly refusing to bow to Unilever’s demands for a 10 per cent price rise following the collapse of sterling.

Unilever later said the dispute had been resolved, but warned that consumers would still have to stomach more pain in the new year.

The Bank of England said on Friday that it was willing to allow inflation to run “a bit” higher next year than its 2 per cent target if it safeguarded jobs and boosted economic growth.

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