The rise in consumer prices seen in the U.K. last month was the highest in almost two years, according to official data released on Tuesday.
The U.K. Office for National Statistics (chart above curtsy of ONS Gov UK) said seasonally-adjusted consumer price inflation (CPI) in the country rose to 1 percent in the year to September, up from 0.6 percent in the month before. The rise in consumer prices exceeded analysts’ expectations and was the highest seen since November 2014.
The CPI was slightly above the 0.9 percent that had been forecast.
Prices also rose beyond expectations month-on-month. The CPI gained 0.2 percent last month, higher than a 0.1 percent gain forecast but lower than 0.3 percent rise recorded in August.
The higher inflation figures were driven by rising prices for clothing, motor fuels and temporary hotel accommodations. The ONS report showed prices of clothes jumped 6 percent in September from the month before.
The data appear to suggest the slump in the value of the sterling in the aftermath of the June referendum may be contributing to rising costs of domestic manufacturers. The rising costs are being passed on through the supply chain.
The ONS has, however, dismissed the possibility of weakening currency telling on prices of common goods.
“CPI inflation has risen to its highest for nearly two years, though it remains low by historic standards,” Mike Prestwood, ONS’ head of inflation, said. “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.”
Seasonally-adjusted core CPI gained 1.5 percent, slightly more than forecast gain of 1.4 percent. The reading for the measure of inflation, which excludes food, alcohol, tobacco and energy costs, rose 1.3 percent in August.
The retail price index (RPI), a measure of inflation that excludes housing costs, gained 2 percent in September as predicted, up from 1.8 percent in the month before.
In spite of inflation hitting its highest level in almost two years, it is still a percentage point below the 2 percent official target set by the Bank of England.
Richard Lim, chief executive at Retail Economics, told The Independent that he expects inflation in the UK to reach 3 percent next year as living costs rise at the fastest rate in two years. He said the latest official data give a slight idea of how British households are going to be impacted by the country’s decision to leave the European Union.
BOE Governor Mark Carney has said that it is likely that inflation will overshoot the 2 percent target the central bank has set in the next year or thereabout. He disclosed the monetary regulator was ready to put with such possibility so as to safeguard jobs in the economy.
This will certainly come as no good news to savers, considering the very low interest rates on offer.
Carney admitted on Friday that the most vulnerable people in the U.K. have tough times lying ahead in the coming months as a result of Brexit and the slumping pound value.