Rising utility and food prices forecast to push up inflation

Deputy Business Editor

Wednesday 19 December 2012

INFLATION remained steady at 2.7% last month but may soon be forced upwards by rising energy and food prices.

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greig cameron deputy business editor

The Consumer Prices Index – the general measure of prices for goods and services bought by UK households – was unchanged in November according to the Office for National Statistics (ONS).

The increasing cost of bread, cereals, fruit, gas and electricity was offset by cheaper motor fuel, furniture and maintenance bills.

Economists warned the data show consumer spending power is expected to stay under major pressure as CPI continues to outstrip wage growth and remain well above the Bank of England's 2% target.With price hikes by five energy providers on the horizon, some analysts predict CPI is unlikely to come down during 2013.Samuel Tombs, from Capital Economics, said: "November's unchanged above-target UK CPI inflation rate means that consumers' spending power is being tightly squeezed in the run-up to Christmas. "Looking ahead, inflation looks set to hover between 2.5% and 3% for the best part of the next year as further increases in utility and food prices kick in. "Given the recent drop in annual growth in average earnings to just 1.3% in October, the squeeze on households' spending power therefore looks likely to persist throughout 2013." The Retail Prices Index, which includes housing costs, was at 3% in November, down from 3.2% in October, thanks to declining costs of motoring and mortgage interest payments.Dr Ros Altmann, director-general of over-50s specialists Saga, said: "The fact inflation is still above the Bank of England's 2% inflation target is dreadful for savers as the combination of low interest rates and high inflation has had disastrous effects on disposable incomes and the spending power of millions of households, which means monetary policy has actually damaged significant parts of the economy."Inflation has now been above 2% since December 2009.Further ONS data out yesterday showed producer prices eased to 2.2% in November from an upwardly revised 2.6% in October thanks to lower input costs.

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Finance

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Rising utility and food prices forecast to push up inflation

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