Higher food and clothing costs drive up rate of inflation

Wednesday 18th November 2020 08:15 GMT

The Office for National Statistics (ONS) reported the Consumer Prices Index (CPI) measure rising to 0.7% last month, from 0.5% in September.

The figure builds on a rising picture for inflation since the end of the chancellor's Eat Out to Help Out scheme during August, as the discounted meals distorted the CPI number.

Analysts had expected a flat picture for prices, as the economy continues to be disrupted by coronavirus crisis restrictions, which largely spread through northern England, Scotland, Wales and Northern Ireland in October.

Some surveys of consumers had pointed to renewed stockpiling of essentials by households in anticipation of tougher lockdowns.

ONS deputy national statistician Jonathan Athow said of October's price picture: "The rate of inflation increased slightly as clothing prices grew, returning to their normal seasonal pattern after the disruption this year.

"The cost of food also nudged up, while second-hand cars and computer games also all saw price rises.

"These were partially offset by falls in the cost of energy and holidays."

The ONS charted a 2.5% hike in clothing and footwear prices as summer discounts eased, while vegetables and fruit costs were the main drivers of a return to food price inflation.

The largest downward pressure on inflation was caused by a fall in household energy prices.

The rate of inflation is historically low but it comes at a time of falling wage growth in a tough economy that has seen a surge in unemployment.

Household spending power - the key driver of the UK's consumer-led economy - is expected to remain under pressure well into next year as jobs continue to be threatened by lockdowns designed to halt the spread of COVID-19.

But economists do not see an inflation-led threat in the months ahead.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said of the ONS figures: "CPI inflation looks set to hover close to 0.7% until April, when the energy component will no longer depress the headline rate and some restaurants, hotels and leisure providers will raise prices in response to the return of VAT to its usual 20% rate.

"Even in Q2 (second quarter), however, CPI inflation should be low, at about 1.5%, given that producer and import price inflation recently have been weak and surveys show that most services firms have little pricing power."

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