Clothing and fuel caused inflation

Rising clothing and fuel prices caused inflation to rebound last month, intensifying the squeeze on cash-strapped households grappling with low wage growth.

Figures from the Office for National Statistics (ONS) showed the Consumer Price Index (CPI) measure of inflation was 2.9% in August, outstripping economists’ expectations of 2.8%.

It brings an end to a momentary pause in June and July at 2.6%, and matches levels seen in May this year and June 2013. CPI was last higher in April 2012 when the rate reached 3%.

Sterling built on earlier gains following the news and was up 0.7% against the dollar at 1.32.

Against the euro, the pound rose 0.6% to 1.10 euros.

Mike Prestwood, ONS head of inflation, said: “Clothing prices rising faster than last year, along with a hike in the cost of petrol, helped nudge inflation upwards.

“Conversely, these effects were partially offset by airfares, which rose more slowly than during last year’s summer holidays.”

The main upward pressure came from clothing and footwear prices, which climbed to their highest level since official records began at 4.6% year-on-year in August.

On a monthly basis, clothing and footwear rose 2.4% after a smaller hike of 1% between July and August in 2016.

The move was partly driven by rising import costs for retailers linked to sterling’s slump following the Brexit vote.

The Consumer Price Index including owneroccupiers’ housing costs (CPIH) was 2.7% in August, up from 2.6% the month before. It is the ONS’ preferred measure of inflation.

“Clothing prices and a hike in petrol nudged inflation up”