Pressure piles on consumers after inflation hits six-year high of 3.1%

INFLATION will continue to take its toll on consumers in the new year after jumping to a near sixyear high of 3.1% last month, it’s been claimed.

Figures from the Office for National Statistics show the Consumer Prices Index (CPI) rose to 3.1% in November, up from 3% in October.

The unexpected increase means inflation has climbed to its highest level since March 2012, confounding expectations that CPI would hold steady for the third month in a row at 3%.

The outcome spells more mis- ery for households as they face a further squeeze on their finances ahead of the Christmas period.

And prices are rising faster than wages — according to the annual survey of hours and earnings (ASHE), median gross weekly earnings for full-time employees were £501 at April 2017, up 1.5% over the year.

Danske Bank economist Conor Lambe said: “Over the past 12 months, inflation has increased sharply — in November 2016 it stood at 1.2%. This rise has taken its toll on consumers as wage increases have not kept pace with the rate of price rises. Looking forward, inflation is not expected to rise too much higher than its current rate. But with the rate of price growth still above the rate of wage growth, the consumer squeeze is likely to continue holding back economic growth in Northern Ireland and the rest of the UK as we move into the new year.”

The lion’s share of the rise came from air fares, which recorded a smaller monthly drop in November at 10.4%, compared with a 13.4% fall over the period last year.

Computer games prices were also boosting everyday costs, as games, toys and hobbies lifted 3.7% on an annual basis last month.

Prices also climbed by 2.2% on a monthly basis, compared with 0.7% growth last year.

Food and non-alcoholic drinks prices pushed higher, picking up by 0.6% month on month in contrast to a 0.5% lift for the period in 2016.

Part of the rise came from chocolate prices, with sugar, jam, honey, syrups, chocolate and confectionery up 1.5% on the month after falling by 1.5% for the same period last year.

November’s increase means Bank of England Governor Mark Carney must pen a letter to Chancellor Philip Hammond — due to be published in February — outlining the reason behind CPI’s rapid rise.

The Government has a CPI target of 2%, with protocol dictating that the Bank must contact Mr Hammond if inflation exceeds 3% or falls short of 1%.

The move will pose fresh questions to the Bank’s interest rate-setting Monetary Policy Committee about whether or not inflation has topped out.

Lucy O’Carroll, Aberdeen Standard Investments chief economist, said: “It’s quite possible that inflation is now close to its peak.”