Inflation rises to two-year high of 1.2%

Posted on 13 December, 2016

The Consumer Prices Index rose by 1.2% in the year to November 2016, following a surprise fall to 0.9% in October, according to the latest ONS statistics.

The rate in November was the highest since October 2014, when it was 1.3%.

Rises in the prices of clothing, motor fuels and a variety of recreational and cultural goods and services were the main contributors to the increase in the rate.

CPIH, which the ONS will adopt as its preferred measure of inflation in March 2017, rose by 1.4% in the year to November 2016, up from 1.2% in October.

Sterling weakness continues to raise the cost of inputs for UK businesses, and there are signs these cost increases are slowly being passed on to consumers. This in turn could hit consumer spending, which has so far held up well despite Brexit-related uncertainty.

October’s fall looked like a blip, and today’s figures mark a resumption of an upward trend. The Bank of England expects inflation to climb throughout next year, hitting 2.7%, and remaining above the 2% target until 2020. Other forecasters see a much sharper rise to as much as 4%.