UK inflation sees biggest jump in two years to highest since November 2014
Published 18/10/2016 | 10:07
British inflation recorded its sharpest jump in more than two years in September, even without any direct evidence of the weaker pound pushing up prices, official figures showed on Tuesday.
Annual consumer price inflation rose to 1.0pc from 0.6pc in August, the highest level since November 2014 and the biggest jump from one month to the next since June 2014, the Office for National Statistics said.
Economists polled by Reuters had expected a reading of 0.9pc, and Tuesday's figure was at the top end of the range of forecasts. They are likely to view September's rise as only the start of a much broader increase, fuelled by the pound's near 20pc plunge since June's vote to leave the European Union.
Still, official statisticians were waiting for clear signs of an impact from the weakened currency. Most of the rise in inflation in September was due to the biggest monthly jump in clothing prices since 2010 and a rise in fuel costs, which had been falling a year earlier.
"There is no explicit evidence the lower pound is pushing up the prices of everyday consumer goods," Mike Prestwood, ONS head of inflation, said.
Looking at the three months to September as a whole, prices were up 0.7pc on a year earlier versus the BoE's forecast for inflation to average 0.76pc over the period.
The central bank forecast in August that inflation would pick up sharply to hit its 2pc target in around a year and then overshoot for the next couple of years, as sterling's big fall after Britain's vote to leave the EU pushed up the cost of imports.
But the surge in inflation risks proving bigger, after sterling plunged to its lowest level on record against a basket of currencies last week, something which is likely to force the BoE to revise up its inflation forecasts next month.
The slide in sterling - combined with evidence that the economy is slowing by somewhat less than the BoE thought likely - also means few economists now expect the BoE to press on with plans to cut interest rates to a new record low next month.
A pricing row last week between Britain's biggest retailer, Tesco, and one of the world's largest consumer goods companies, Unilever, was a first clear sign for consumers of the turbulence unleashed by the Brexit vote and of higher inflation to come.
The pound's fall - down 19pc against the U.S. currency and about 16pc against the euro - has left suppliers and retailers battling for profits as imported goods become more expensive.
Tesco briefly halted online sales of goods produced by Unilever - which owns brands such as Marmite and Ben & Jerry's ice cream - because of the increase in prices.
British inflation has been below the Bank of England's 2pc target for nearly three years and last year it was zero, the lowest since comparable records began in 1950.
BoE Governor Mark Carney last week said the central bank could tolerate "a bit" of an overshoot against its inflation target, to help accommodate economic growth and employment.
It will release new inflation forecasts next month.
An ONS measure of core consumer price inflation -- which strips out changes in the price of energy, food, alcohol and tobacco -- rose to 1.5pc from 1.3pc, slightly above economists' expectations for 1.4pc.
Factory gate prices increased 1.2pc, the biggest increase in three years, and slightly stronger than forecasts of a 1.1pc annual increase.
The ONS also released figures for August house prices, which showed an 8.4pc annual rise across the United Kingdom as a whole compared with 8.0pc in July.
Prices in London alone increased 12.1pc.