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| UK inflation hits near six-year high of 3.1% – business live | UK inflation hits near six-year high of 3.1% – business live |
| (35 minutes later) | |
| The pound initially jumped when the inflation figures were released, as foreign exchange traders swiftly calculated that it made an interest rate rise more likely. | |
| But that effect didn’t last long. | |
| Sterling is now down around 0.15% against the US dollar and the euro. | |
| Ranko Berich, head of market analysis at Monex Europe, says City traders are focusing on Brexit again. | |
| In particular, comments from European Parliament chief Guy Verhofstadt criticising UK Brexit secretary David Davis: | |
| “Sterling’s gains from the release were extremely short lived, and the pound is now once again under pressure after Guy Verhofstadt made comments about David Davis scoring an “own goal” on the Brexit deal. The last hour of price action demonstrates quite clearly that for sterling, Brexit is still the only game in town.” | |
| Remarks by David Davis that Phase one deal last week not binding were unhelpful & undermines trust. EP text will now reflect this & insist agreement translated into legal text ASAP #Brexit | |
| Oops. European Parliament Brexit pointman Verhofstadt says David Davis comments on deal were 'own goal', there will now be 'hardening of position' of EU leaders at summit and EP | |
| Britain’s inflation squeeze may actually intensify over the festive period, warns Ben Edwards, Portfolio Manager at investment giant BlackRock: | |
| UK households may have to continue to endure higher costs in some segments over Christmas particularly as food retailers continue to pass on higher producer prices and airfares take their normal seasonal trip north. | |
| But Edwards also predicts that inflation will ‘drift lower” in 2018. | |
| That’s partly because the impact of the weak pound will eventually drop out of the data (as inflation compares today’s prices against the same items a year ago). | |
| There’s little chance of UK wages catching up with inflation in the next few months, warns Andrew Sentance, senior economic adviser at PwC. | |
| Sentance also blames the weak pound for pushing up the cost of living, saying: | |
| The fall in sterling since the Brexit vote continues to push up the prices of imported goods and the strength of the global economy is also contributing to upward pressure on food and energy prices. | |
| “We are probably close to the peak for inflation now, but it will only fall back gradually next year. That means price rises will continue to run ahead of pay growth in the first half of 2018 - continuing the squeeze on real incomes and consumer spending. That is likely to continue to act as a dampener on economic growth in the next few quarters. | |
| With inflation rising, shoppers need to be particularly savvy this Christmas, warns Hannah Maundrell, Editor in Chief of money.co.uk. | |
| She says people should pay particular attention to rising food costs, or risk a nasty shock at the till. | |
| With inflation now at a 6 year high there’s no escaping the fact the luxury of low inflation is over. | |
| “The cost of food, non alcoholic beverages, transport and fun activities are creeping up so if you’re not careful your household finances could be stretched. | |
| “For many of us prices are rising faster than our wages and we’re in one of the most expensive times of year so budgeting is the key to beating the squeeze on your wallet. | |
| Digging into the inflation report, you can see that the cost of bread has jumped by 5.3% in the last year. | Digging into the inflation report, you can see that the cost of bread has jumped by 5.3% in the last year. |
| Butter is up by over 21% - enough to make any late-breakfasting readers splutter over their toast. | Butter is up by over 21% - enough to make any late-breakfasting readers splutter over their toast. |
| Imported lamb has risen by over 12% in the last year (compared to just 3.2% for home-reared animals), and fresh fish is 11.2% more expensive than in November 2016. | Imported lamb has risen by over 12% in the last year (compared to just 3.2% for home-reared animals), and fresh fish is 11.2% more expensive than in November 2016. |
| Coffee was 10% more expensive than a year ago, but tea prices were virtually flat, according to the ONS’s data (online here). | Coffee was 10% more expensive than a year ago, but tea prices were virtually flat, according to the ONS’s data (online here). |
| Here’s more detail (the final column shows the change in pricing over the last 12 months; alongside is the monthly change) | Here’s more detail (the final column shows the change in pricing over the last 12 months; alongside is the monthly change) |
| This latest rise in inflation shows that Britain is still suffering from the plunge in the pound after the Brexit vote in June 2016. | This latest rise in inflation shows that Britain is still suffering from the plunge in the pound after the Brexit vote in June 2016. |
| As Maike Currie of Fidelity puts it: | As Maike Currie of Fidelity puts it: |
| Just two years ago, Mark Carney was writing his fourth letter to former Chancellor, George Osborne to explain why prices were in deflationary territory. | Just two years ago, Mark Carney was writing his fourth letter to former Chancellor, George Osborne to explain why prices were in deflationary territory. |
| But in the past year, British households have suffered an ongoing pinch on their spending power since sterling’s Brexit-induced slum | But in the past year, British households have suffered an ongoing pinch on their spending power since sterling’s Brexit-induced slum |
| Channel 4’s Siobhan Kennedy also blames the weak pound for driving up the cost of imports such as oil. | Channel 4’s Siobhan Kennedy also blames the weak pound for driving up the cost of imports such as oil. |
| For higher airfares pushing up inflation read higher oil prices and of course double whammy of exchange rate due to depressed price of sterling | For higher airfares pushing up inflation read higher oil prices and of course double whammy of exchange rate due to depressed price of sterling |
| The jump in the cost of food and fuel in the last year will hit the eldest and most vulnerable particularly hard, says Maike Currie, investment director for personal investing at Fidelity International. | The jump in the cost of food and fuel in the last year will hit the eldest and most vulnerable particularly hard, says Maike Currie, investment director for personal investing at Fidelity International. |
| Today’s inflation figures shows that food and non-alcoholic drink prices have jumped by 4.2% in the last 12 months. | Today’s inflation figures shows that food and non-alcoholic drink prices have jumped by 4.2% in the last 12 months. |
| TUC General Secretary Frances O’Grady says this will hurt families this Christmas. | TUC General Secretary Frances O’Grady says this will hurt families this Christmas. |
| “Christmas dinner is going to be a lot more expensive this year. Food prices have gone up at twice the rate of wages. | “Christmas dinner is going to be a lot more expensive this year. Food prices have gone up at twice the rate of wages. |
| “The government is failing to deal with Britain’s cost of living crisis. Working people need a pay rise. They shouldn’t have to worry about putting the turkey on the table.” | “The government is failing to deal with Britain’s cost of living crisis. Working people need a pay rise. They shouldn’t have to worry about putting the turkey on the table.” |
| The Bank of England won’t be happy to see inflation over 3% either: | The Bank of England won’t be happy to see inflation over 3% either: |
| UK inflation rises to 3.1%, the highest in nearly 6 years and forcing BoE governor Mark Carney to write to the Chancellor to explain why it is outside than the Bank's 1-3% target range. pic.twitter.com/WUKhQqVjJ5 | UK inflation rises to 3.1%, the highest in nearly 6 years and forcing BoE governor Mark Carney to write to the Chancellor to explain why it is outside than the Bank's 1-3% target range. pic.twitter.com/WUKhQqVjJ5 |
| The jump in UK inflation in November is a nasty shock for City economists, who had hoped that it might have peaked in October (at 3.0%). | The jump in UK inflation in November is a nasty shock for City economists, who had hoped that it might have peaked in October (at 3.0%). |
| Aberdeen Standard Investments Chief Economist Lucy O’Carroll explains: | Aberdeen Standard Investments Chief Economist Lucy O’Carroll explains: |
| “This is slightly higher than expected and will prompt a letter from Bank of England Governor Carney to the Chancellor, explaining why inflation has overshot its target by this margin and what the Bank will do about it. | “This is slightly higher than expected and will prompt a letter from Bank of England Governor Carney to the Chancellor, explaining why inflation has overshot its target by this margin and what the Bank will do about it. |
| “It’s quite possible that inflation is now close to its peak. But some of the latest surveys suggest that service sector costs and prices are rising. Given how dominant services are in the economy, this could feed through to inflation overall. | “It’s quite possible that inflation is now close to its peak. But some of the latest surveys suggest that service sector costs and prices are rising. Given how dominant services are in the economy, this could feed through to inflation overall. |
| So this could encourage the Bank of England to consider raising interest rates (they’re currently just 0.5%). | So this could encourage the Bank of England to consider raising interest rates (they’re currently just 0.5%). |
| O’Carroll adds: | O’Carroll adds: |
| The Bank of England has a tricky tightrope to walk. Too much inflation could threaten the Bank’s credibility and therefore its grip on the economy. But they need to keep consumer spending, the engine of the UK economy, chugging along too. | The Bank of England has a tricky tightrope to walk. Too much inflation could threaten the Bank’s credibility and therefore its grip on the economy. But they need to keep consumer spending, the engine of the UK economy, chugging along too. |
| If inflation keeps creeping up, or remains elevated, then the chances of the engine sputtering rise incrementally.” | If inflation keeps creeping up, or remains elevated, then the chances of the engine sputtering rise incrementally.” |
| Britain’s inflation rate has been driven up to 3.1% by transport costs, food, and recreational spending (such as computer games): | Britain’s inflation rate has been driven up to 3.1% by transport costs, food, and recreational spending (such as computer games): |
| This charts shows the details: | This charts shows the details: |
| Breaking! UK inflation has hit its highest level in almost six years, as Britain’s cost of living squeeze continues to bite. | Breaking! UK inflation has hit its highest level in almost six years, as Britain’s cost of living squeeze continues to bite. |
| The consumer prices index rose by 3.1% in the 12 months to November, the highest level since March 2012. | The consumer prices index rose by 3.1% in the 12 months to November, the highest level since March 2012. |
| Air fares were the biggest factor behind the jump, according to the Office for National Statistics, along with recreational and cultural goods and services such as computer games. | Air fares were the biggest factor behind the jump, according to the Office for National Statistics, along with recreational and cultural goods and services such as computer games. |
| With UK earnings only rising by around 2.1% to 2.2% in recent months, this means households are still suffering falling real wages in the run-up to Christmas. | With UK earnings only rising by around 2.1% to 2.2% in recent months, this means households are still suffering falling real wages in the run-up to Christmas. |
| This will also force Bank of England governor Mark Carney to write a letter to chancellor Philip Hammond to explain why inflation isn’t close to its 2% target. | This will also force Bank of England governor Mark Carney to write a letter to chancellor Philip Hammond to explain why inflation isn’t close to its 2% target. |
| More to follow! | More to follow! |