CPI inflation jumps to its highest level in nearly two years

Inflation has jumped to a near two-year high as the rising cost of clothes, restaurants and hotels pushed up the cost of living.

By The Newsroom
Tuesday, 18th October 2016, 3:01 pm
Updated Tuesday, 25th October 2016, 6:52 pm
The main upward pressure came from a jump in clothing and footwear
The main upward pressure came from a jump in clothing and footwear

The Consumer Price Index (CPI) inflation hit a higher-than-expected 1.0% in September - the same level as November 2014 - rising from 0.6% in August.

Economists had been pencilling an increase of 0.9%.

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 nearly 20% against the US dollar since the UK voted to leave the EU.

The Retail Prices Index (RPI) - a separate measure of inflation, which includes housing costs - rose to 2% in September, up from 1.8% 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% between August and September, compared a 3.3% rise over the same period last year.

Overall clothing prices rose by 5.5% month-on-month in September.

The ONS said the “relatively large” increase was in line with seasonal trends and not triggered by the drop in the value of the pound following the EU referendum result.

It said 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% compared to 0.2% a year ago.

Petrol prices climbed by 1.2 pence per litre (ppl) month-on-month to 111.2 pence, while diesel prices increased by 1.5ppl to 113.3 pence.

However, food prices remained under pressure, dropping 0.3%, compared to a 0.1% rise last year.

Supermarket prices 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.