UK Inflation Surges To Highest Level In Over Five-and-a-half Years

Inflation in Britain climbed to the highest level in over five in and a half years in November, remaining above the Bank of England's 2% target for the ninth consecutive month, after breaking through the threshold for the first time in three years in March.

According to data released by the Office for National Statistics (ONS) on Tuesday (12 December), inflation as measured by the Consumer Price Index (CPI) rose 3.1% year-on-year last month, compared with the 3% growth recorded in October and September.

The figure was the highest level on record since March 2012 and will force Bank of England Governor Mark Carney to write a letter to the Chancellor explaining why price growth is so far above the BoE's 2% target.

The ONS said the cost of air fares, fuel and computer games were the main drivers of the increase.

The pound's sharp decline in the wake of the Brexit vote has pushed up inflation, as it has driven import prices higher, eroding living standards for British workers as wages fail to keep pace.

On a monthly basis, inflation climbed 0.3%, after rising 0.1% in the previous month, beating analysts' expectations for a 0.2% increase.

Meanwhile, core inflation, which excludes volatile items such as energy prices, was unchanged at the 2.7% rate recorded in the previous two months, which was the highest on record since 2011.

The latest report is in line with the forecast issued by the BoE last month, when it said it expected CPI inflation to peak at 3.2% this year, before falling to 2.4% and 2.2% in 2018 and 2019 respectively.

The inflation data comes only a day before the release of the latest snapshot of Britain's labour market, which is expected to show average weekly earnings excluding bonuses only grew 2.2% year-on-year in October.

Economists have previously warned the squeeze on households was being exacerbated by subdued wage growth.

Data released yesterday (11 December), showed consumer spending in Britain fell for the third consecutive month in November as Black Friday price cuts failed to persuade shoppers to splash out on big-ticket items.

According to figures released by IHS Markit and Visa, spending fell 0.9% compared to a year earlier following a 2.1% drop in October.

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