UK inflation jumps to 10-year high as petrol prices soar | Inflation

UK inflation jumped to 5.1{92b8314a80b58944ba0df9bff999fd6692ae6ba618bc5950ca8fb5ab90484bed} in November as the price of petrol reached a record high and a computer chip shortage continued to push up the cost of cars. The Office for National Statistics (ONS) said the increase, which exceeded City forecasts of a rise to 4.8{92b8314a80b58944ba0df9bff999fd6692ae6ba618bc5950ca8fb5ab90484bed}, took the consumer […]

UK inflation jumped to 5.1{92b8314a80b58944ba0df9bff999fd6692ae6ba618bc5950ca8fb5ab90484bed} in November as the price of petrol reached a record high and a computer chip shortage continued to push up the cost of cars.

The Office for National Statistics (ONS) said the increase, which exceeded City forecasts of a rise to 4.8{92b8314a80b58944ba0df9bff999fd6692ae6ba618bc5950ca8fb5ab90484bed}, took the consumer prices annual rate to its highest level since September 2011, when it stood at 5.2{92b8314a80b58944ba0df9bff999fd6692ae6ba618bc5950ca8fb5ab90484bed}.

Analysts said the increase in inflation from 4.2{92b8314a80b58944ba0df9bff999fd6692ae6ba618bc5950ca8fb5ab90484bed} in October is expected to put further pressure on the Bank of England to raise interest rates when it meets on Thursday, although the spread of the Omicron variant may deter policymakers from taking such action until the new year.

Last month, Bank officials were predicting that inflation would rise more gradually and exceed 5{92b8314a80b58944ba0df9bff999fd6692ae6ba618bc5950ca8fb5ab90484bed} by next April, when a price cap on gas bills is expected to be lifted by the energy regulator Ofgem.

Unions and anti-poverty campaigners said the jump in prices would hit household living standards without further action from the Treasury.

Labour market figures on Tuesday showed wage increases moderated in October to below 4{92b8314a80b58944ba0df9bff999fd6692ae6ba618bc5950ca8fb5ab90484bed}, indicating that despite rising employment and a widespread vacancies, workers are likely to see a fall in disposable incomes in the run-up to Christmas.

The TUC said the chancellor, Rishi Sunak, must fully fund real pay rises for public sector workers and the minimum wage should increase immediately to £10 an hour.

Jack Leslie, a senior economist at the Resolution Foundation thinktank, referring to the combined impact of the Omicron variant and inflation, said: “Next year is likely to be marked by acute economic pain for some parts of the economy alongside a nationwide living standards squeeze.”

Sunak said the government had provided £4.2bn of support through the winter from “freezes to alcohol and fuel duty and the reduction of the universal credit taper and increase in work allowances”. He added: “The most important thing we can do to safeguard the economic recovery is for everyone to get boosted now.”

Petrol was one of the main drivers of inflation after it rose to an average 145.8p a litre in November compared with 112.6p a litre a year earlier. The November 2021 price is the highest recorded.

Used car prices increased by 3.1{92b8314a80b58944ba0df9bff999fd6692ae6ba618bc5950ca8fb5ab90484bed} from October to November 2021, leading to a cumulative increase of 31.3{92b8314a80b58944ba0df9bff999fd6692ae6ba618bc5950ca8fb5ab90484bed} since April 2021, the ONS said.

The other parts of the inflation basket of goods and services to increase in price were food and non-alcoholic beverages, clothing and footwear, and furniture and household goods, the ONS added.

The central bank’s rate-setting monetary policy committee faces a dilemma after figures on Tuesday showed that the labour market had recovered without a significant rise in the jobless total.

In more normal times, low unemployment and record levels of vacancies during a period of high inflation would trigger high pay demands, putting further pressure on prices.

However, the economy had already begun to slow ahead of concerns about the Omicron variant and there are fears that a fourth lockdown in the new year will force the economy into reverse gear.

Brent crude oil prices have fallen by $10 a barrel since October, which should lead to a fall in prices at the pumps over the coming months.

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Bank of England officials are expected to say the increase in average prices will prove to be temporary, although they are likely to persist for longer than the central bank predicted only a few months ago.

Core inflation, which strips out volatile prices such as petrol, increased from 3.4{92b8314a80b58944ba0df9bff999fd6692ae6ba618bc5950ca8fb5ab90484bed} in October to 4{92b8314a80b58944ba0df9bff999fd6692ae6ba618bc5950ca8fb5ab90484bed} in November, its highest level since 1992, when core inflation peaked at 4.1{92b8314a80b58944ba0df9bff999fd6692ae6ba618bc5950ca8fb5ab90484bed}.

Janine Boshoff, an economist at the National Institute of Economic and Social Research, said inflation was likely to be persistent and stay above 5{92b8314a80b58944ba0df9bff999fd6692ae6ba618bc5950ca8fb5ab90484bed} throughout the first half of 2022.

Kitty Ussher, the chief economist at the Institute of Directors, said businesses expected prices to rise in the new year and accused the government of “making matters worse” by raising national insurance contributions next April.

“The government’s decision to raise employers’ national insurance in April 2022 will add further fuel to the inflationary fire,” she said.

https://www.theguardian.com/business/2021/dec/15/uk-inflation-jumps-to-10-year-high-as-petrol-prices-soar

Shaqil Heaton

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