The Office of National Statistics have released figures that show inflation rose to 3.1% in November, the highest in nearly 6 years. The increase was led largely by growth in prices of games and air travel.
The new figures indicates no relent on the squeeze on household spending, with current weekly wages growing at a rate of only 2.2%. Treasury Financial Secretary Mel Stride has responded to these concerns and claimed that 2018 will bring better news for UK residents. She said: “Inflation is expected to fall over the coming year, but I recognise families are feeling a squeeze now. We are determined to help, which is why the autumn budget cut income tax, boosted basic pay by more than inflation and froze alcohol and fuel duties.”
The ONS have said that one of the main contributors to the increases inflation was to do with rising transport costs and pointed to a price rise of 0.1% between October and November this year compared with a 0.3% decrease in price between October and November in the previous year. Much of this is down to the increased cost of airfares which fell in price by 10.4% this year but more slowly that last year when prices dropped by 13.4%. Rising costs of food were also seen to be a factor, along side cultural goods and services, notable computer games which saw a large spike in cost.
Lucy O’Carrol of Aberdeen Investment Standards said: “Some of the latest surveys suggest service sector costs and prices are rising. Given how dominant services are in the economy, this could feed through to inflation overall. That means that further interest rate rises are definitely not off the table.
“The Bank of England has a tricky tightrope to walk. Too much inflation could threaten the Bank’s credibility and therefore its grip on the economy.”
The rate of inflation has increased from 1.2% to 3.1% in the last year which is the most since March 2012. These numbers are largely put down to the depreciation of the pound following Brexit last year. One of the stipulations of the UK leaving the EU was that the Bank of England must make sure inflations remains within 1% of the governments target of 2%. The failure to do so will result Mark Carney, the governor for the bank of England being forced to write a letter to Philip Hammond to explain the increase.
Senior economic analyst at the resolution foundation Adam Corlett commented on the new figures saying “As we approach the end of the year, rising inflation will deepen the current squeeze on pay. For low-income families it also further erodes the value of working age benefits – which remain frozen at their 2015 levels.
“This double hit means many families will be feeling the pinch in the runup to Christmas. While inflationary pressures are expected to ease next year, far stronger wage growth will be needed to get Britain’s pay recovery back on track.”
Francis O’Grady, general secretary of the TUC mirrored these concerns, saying Christmas dinner is going to be a lot more expensive this year. Food prices have gone up at twice the rate of wages.
“The government is failing to deal with Britain’s cost of living crisis. Working people need a pay rise. They shouldn’t have to worry about putting the turkey on the table.”