Inflation at 50-month high

Inflation rose again last month, with the Consumer Price Index returning to its recent high of 2.9%.

After two months at 2.6%, the CPI rate has returned to its May level – the highest in 50 months.

The Office for National Statistics said that prices in all its broad categories – such as furniture and household goods, restaurants and hotels – were higher than a year ago.

Clothing and footwear inflation was at a record 4.6% last month, which it said “may reflect changes in the exchange rate impacting on the cost of imported clothing since clothing and footwear is one of the most import-intensive categories”.

Richard Lim, chief executive at Retail Economics said: “Inflation resumed its ascent as the Brexit-induced fall in sterling continued to push up the cost of living for families.

“With wage growth remaining disappointingly sluggish, rising prices across food, clothing, energy and transport has intensified the pressure on personal finances.”

Business leaders in Greater Birmingham said the government must hold its nerve following the announcement.

Paul Faulkner, chief executive of Greater Birmingham Chambers of Commerce, said: “The rate of inflation saw a noticeable increase over the summer, with the figure for August matching the four-year high that was recorded in May as higher petrol and air fare prices contributed to the latest rise.

“Also, the recovery of the Eurozone economy played a part as this made imports from Europe more costly.

“Stagnant wage growth and higher inflation are continuing to put a squeeze on living standards and now is the time for the government to hold their nerve and ensure the foundations are in place to ride out the economic uncertainty.”

Nevertheless, he said that in light of the latest figures, it was reassuring to see the value of the pound hit a year-long high, while it remained to be seen whether the financial markets were right in predicting that the Bank of England would now have to raise interest rates to offset this uncertainty.