Yahoo Finance UK inflation to hit a two-year high
Sterling’s weakness since Brexit vote is pushing up prices of fuel, food and clothes, official figures to show
Inflation is set to hit its highest level in more than two years this week, according to economists, as the sharp drop in sterling since the referendum fuels a rise in the cost of living.
Official figures due to be published on Tuesday are expected to show that fuel, food, air fares and clothing prices have driven the headline rate to 1.4% in December, from 1.2% in November. If economists polled by Reuters are correct, the rate would be the highest since August 2014, when the consumer prices index was 1.5%.
“Inflation is expected to have been lifted in December by higher fuel prices as well as sterling’s weakness increasingly feeding through to cause retailers, services companies and manufacturers to lift their prices,” said Howard Archer, chief UK economist at research company IHS Markit.
The Bank of England has warned life will be tougher for consumers in 2017, with inflation expected to rise close to 3%, squeezing family budgets against a backdrop of slowing economic growth.
Meanwhile, National Debtline said the number of people seeking advice on how to cope with debts was up sharply compared with a year earlier. Calls to the free advice service were up 17% in the first eight working days of 2017 compared with the same period last year, while the number of people seeking advice online jumped by 55%.
Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline, said households should scrutinise their finances as inflation rises. She said: “As the first credit card bills of 2017 begin to arrive through letterboxes this week, many people will be worrying about how to cope. We are seeing a big leap in the number of people coming to us for help – and yet we know that many more will be struggling with financial problems on their own.
“With the UK economy entering a period of significant uncertainty and inflation beginning to creep up, it is important that households use the start of the year to take stock of their personal finances – and take action to deal with any debts now.”
Some of Britain’s biggest retailers have warned prices could rise in 2017 as they are forced to pass on higher costs to customers. A weaker pound makes the cost of goods imported from abroad more expensive. Next has warned clothing prices could rise by about 5% in the coming months.
Figures published last week by Kantar Worldpanel showed that over the Christmas period supermarket prices rose for the first time in more than two years, underlining expectations that household budgets will come under increased pressure in 2017.
Kantar said inflation returned with a 0.2% increase in like-for-like grocery prices for the 12-week period ending on 1 January compared with a year earlier. These are not the official inflation figures, but are based on 75,000 products Kantar compares year-on-year in the proportions purchased by shoppers.
