Inflation jumped last month

INFLATION rose to 1.2% last month to reach its highest level in more than two years.

The Office for National Statistics said: “Rises in the prices of clothing, motor fuels and a variety of recreational and cultural goods and services, most notably data processing equipment, were the main contributors to the increase in the rate.”

Richard Lim, chief executive at independent research consultancy Retail Economics said: “The cost of living is rising at the fastest pace in over two years as the impact of weaker sterling begins to feed through to families.

“The collapse of sterling has set in motion a wave of rising input costs facing retailers. Put simply, they can either pass these costs on to consumers, take a hit on margins or seek to mitigate these pressures elsewhere in the supply chain. Most retailers will use a combination of all three to distribute the impact of rising input costs but households will have to share some of the pain. How much pain and how quickly it feeds through will be critical in determining the strength of spending next year.

“Hedging strategies will cushion most of the inflationary pressure this side of Christmas but, as these contracts begin to unwind next year, inflation will accelerate and real wages are expected to shrink. We expect inflation could hit 3% next year against a backdrop of rising unemployment and weaker wage growth.”