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Inflation moves up despite lockdown as Brits splash out on clothes and transport

Simon English
·2-min read
 Chancellor of the Exchequer Rishi Sunak (Getty Images)
Chancellor of the Exchequer Rishi Sunak (Getty Images)

INFLATION jumped in December, even though most shops were shut, as Britons spent on clothes and transport.

It rose to 0.8% from 0.6% in November. Economists say inflation will be a big topic this year.

ONS deputy national statistician for economic statistics Jonathan Athow said: "Clothing prices put upward pressure on inflation in December, despite some evidence of continued discounting.

"Transport costs, including air, sea and coach fares, as well as petrol prices, rose as some travel restrictions eased during parts of the month.

"These were partially offset by falling food prices, most notably for vegetables and meat."

While that rise might alarm some, it leaves inflation still far from the 2% target price the Bank of England is supposed to hit.

But it will increase talk that interest rates may have to rise before too long, putting pressure on the Bank of England and its governor Andrew Bailey.

Jon Hudson, UK equity fund manager at Premier Miton Investors, said: “The inflation rate remains well below target but given the lockdowns it is unsurprising. Should the vaccine be successfully rolled out and restrictions reduced, it is likely inflation will pick up in the second half of the year, driven by consumers spending the money they have been unable to over the past year, and higher commodity prices.”

Chancellor Rishi Sunak is looking at tax rises in his upcoming budget to pay for the expense of Covid-19.

Equals Group chief economist Jeremy Thomson-Cook said: “We are going to be talking a lot more about inflation in 2021 than we did 2020. Both Brexit and Covid-19 are factors that have caused substantial pain for businesses and their supply chains. Rising prices as demand works against supply constraints is already being seen in certain imports courtesy of the goods themselves and the shipping containers that they travel round the world in.”

Equals Group chief economist Jeremy Thomson-Cook said: “We are going to be talking a lot more about inflation in 2021 than we did 2020. Both Brexit and Covid-19 are factors that have caused substantial pain for businesses and their supply chains. Rising prices as demand works against supply constraints is already being seen in certain imports courtesy of the goods themselves and the shipping containers that they travel round the world in.”