The UK’s inflation rate climbed to its joint highest in more than five years in August as the price of petrol and clothing rose.
UK inflation measured by the Consumer Prices Index rose to 2.9% in August, up from 2.6% in July, figures released today show.
The fall in the value of sterling since the EU referendum continued to be a major impetus for rising prices, the Office for National Statistics said.
But a rebound in the price of oil also had an impact, pushing up fuel prices.
The bigger-than-expected rise in inflation comes ahead of the Bank of England’s next announcement on interest rates on Thursday (September 14). However, economists said the Bank was still highly unlikely to raise rates at the meeting.
According to the ONS, the prices of most goods climbed during August, largely because of rising import costs for retailers.
Clothing and footwear prices had the biggest impact, but petrol also pushed the overall cost of living higher, increasing 1.8p a litre to 115.7p during the month, while diesel gained 2p to 117.6p.
The most recent wages data showed average weekly earnings rising at an annual pace of 2.1%. New figures on pay are due to be released on Wednesday (September 13).
August’s inflation rate is far above the Bank of England’s target of 2%. The Bank has said it expects inflation to reach 3% in October, but start to ease early in 2018.
Paul Hollingsworth, UK economist at Capital Economics, said the latest figures were likely to provide “further ammunition” to those members of the Bank’s rate-setting Monetary Policy Committee who favour an earlier rise in interest rates.
“However, we don’t think the rise in CPI inflation has much further to run,” he added.
“Indeed, we expect it to peak at 3.1% in October, before dropping back next year as the impact of the pound’s fall starts to fade.”
The ONS’s preferred measure of inflation CPIH – which includes owner-occupiers’ housing costs – rose to 2.7% last month from 2.6% in July. The Retail Prices Index (RPI) measure of inflation rose to 3.9% in August from 3.6%.
Meanwhile, figures released yesterday (September 11) by the British Retail Consortium (BRC) show that high street retail footfall declined by 2.6% in August – a bigger fall than the previous month – suggesting shopper confidence is dipping.
It was the worst performance of the year and the third month out of the last four in which footfall has dropped by more than 2%, following a 2.1% fall in July. In contrast, online business jumped 11% in value in August – the highest monthly rise in 2017.
Footfall measured across all retail destinations and outlets in August was down 1.2% with the steepest declines in greater London (down 2%) and Northern Ireland (down 2.3%). The east and south-east of England and Wales were the three regions that experienced a footfall rise during the month. The east has now seen nine months of consecutive footfall growth in contrast to the East Midlands, which marked six months of consecutive year-on-year decline with a 4.9% fall in August.
BRC chief executive Helen Dickinson said: “Encouraging shoppers back to more of our town centres is crucial to reducing the high number of vacant premises and the increasing gap between the vibrant and in-demand areas and those at the much more economically fragile end of the spectrum.
“The sheer cost of doing business on high streets has direct implications for the affordability of retailers’ investments in new or refurbished stores. A far more concerted effort is required from policymakers to stem and ultimately reduce the cost of doing business, particularly in more economically fragile communities.”
Diane Wehrle, marketing and insights director at retail intelligence company Springboard, said: “Part of the reason for more subdued footfall was a rise in online activity in terms of value and volume. In part, the rise in online activity will have been a result of much cooler, rainy weather in August than in 2016, which undoubtedly discouraged some shopping trips.
“However, it is also a function of increasing inflationary pressures, driving consumers online in a search for lower prices which is likely to become more significant as inflation continues to increase its bite on household budgets.”