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.”

Chris Williamson, chief economist at Markit, warned “further upward pressure [was] likely to appear in coming months”.

He said: “The worry is that, as prices continue to rise, consumer spending is likely to be squeezed.

“At the moment, evidence suggests that spending amid higher prices is being supported by households eating into their savings, but this is clearly unsustainable. The risk is that waning consumer demand will slow the economy.”

The Bank of England, which is expected to keep interest rates on hold when its Monetary Policy Committee meets later this week, is expecting inflation to rise to nearly 3% in 2018.

Richard Lim, chief executive at independent research consultancy Retail Economics, added: “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.

“How much pain and how quickly it feeds through will be critical in determining the strength of spending next year.”

Source: Office for National Statistics