Retail inflation zooms to 4.88% in November on high food prices

Posted December 12, 2017

Annual inflation of 4.88% last month was the steepest level in 15 months, government data showed on Tuesday, up from 3.58% in October.

The infrastructure group said its performance in 2017 remains in line with board expectations.

Alistair Wilson, head of retail platform strategy at Zurich, says: "Higher inflation is putting further strain on family finances as we approach what is already the most expensive time of the year, and it looks set to remain above the rate of wage growth as we move into 2018". Inflation was last higher in March 2012.

He added that the prices of raw materials and goods leaving factories continued to increase as oil and petrol prices continued to rise. The Bank of England has a tricky tightrope to walk.

According to the data from the Ministry of Statistics & Programme Implementation, consumer price index (CPI) inflation in November rose to 4.88 per cent from 3.58 per cent reported for October.

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Input prices are up 7.3 per cent from a year earlier but competition has forced manufacturers to absorb some of pressure, with output prices increasing just 3 per cent over the same period. Given Mr Carney and his colleagues raised interest rates last month, he'll also be able to point to the fact that, for once, he's doing something about it too.

Lucy O'Carroll, chief economist at Aberdeen Standard Investments, said: "It's quite possible that inflation is now close to its peak". The rise in headline inflation was mainly due to three factors: increased vegetable and dairy prices, accommodation costs and unfavorable base effects.

Meanwhile, core inflation, which excludes volatile items such as energy prices, was unchanged at the 2.7% rate recorded in the previous two months, which was the highest on record since 2011.

"The market had geared up for an above-3-percent inflation reading today anyway - if you look at the spread of top-rated economists, about half of them were looking for 3.1 percent", said Nomura currency strategist Jordan Rochester.

"Too much inflation could threaten the Bank's credibility and therefore its grip on the economy", she says.