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UK inflation hits more than 2-year high in November
[LONDON] British inflation hit a more than two-year high last month, pushed up more expensive clothing and the impact of June's Brexit vote on the prices paid by consumers for technology goods.
Consumer prices rose 1.2 per cent compared with a year ago, the Office for National Statistics said, and above economists'expectation for a 1.1 percent annual rise in a Reuters poll.
Last month the Bank of England forecast that inflation would surge to about 2.8 per cent by mid-2018, as sterling's big fall after Britain's vote to leave the EU pushes up the cost of imports.
The pound's fall - the currency is currently down about 15 per cent against the US currency and eight per cent against the euro - has left suppliers and retailers battling for profits as imported goods become more expensive.
There was a respite for sterling in November, which eased the pressure on factories paying for materials and energy during the month, but November's data underscored how inflation in Britain looks set to rise sharply next year.
British inflation has been below the Bank of England's two per cent target for nearly three years and last year it was zero, the lowest since comparable records began in 1950.
Bank of England policymakers look set to keep interest rates on hold this week after dropping their signals of another cut and adopting a neutral stance last month.
Clothing prices provided the biggest boost to the annual inflation rate in November, caused in part by fewer discounts offered by retailers.
Prices for recreation and culture rose by 0.5 per cent from October to November, as prices for "data processing" goods rose. Manufacturers such as Apple have increased prices in Britain to reflect the fall in the value of sterling since the Brexit vote.
Last week a BoE survey showed Britons expect a sharp rise in inflation over the coming year and more now believe a hike in interest rates is on the way.
BoE Governor Mark Carney has said the central bank could tolerate some overshoot against its inflation target, to help accommodate economic growth and employment.
While still low by historical standards, British government bond yields have risen sharply on bets of higher inflation spurred by the pound's plunge and, more recently, bets that President-elect Donald Trump's plans to boost fiscal spending would boost prices globally.
On Monday oil prices rose by as much as 6.5 per cent to an 18-month high after Opec members and some of their rivals reached a first deal since 2001 to jointly reduce output to try to tackle global oversupply and boost prices.
British factory gate prices rose at an annual rate of 2.3 per cent in November, the biggest since April 2012, compared with forecasts of a 2.5 per cent annual increase.
Prices paid by factories for materials and energy fell more than one per cent on the month but were up by nearly 13 per cent compared with November 2015 - the biggest annual increase since October 2011.
The ONS also released figures for house prices in October which showed an 6.9 per cent annual rise across the United Kingdom as a whole compared with 7.0 per cent in September.
Prices in London alone rose by 7.7 per cent, the weakest increase since June 2013.