ANNUAL UK inflation has surged to its highest for nearly six years, official data show, and ongoing pressure on Scottish household finances from sterling’s post-Brexit vote weakness is highlighted in the latest retail sales figures.
Data published yesterday by the Office for National Statistics reveal annual UK consumer prices index (CPI) inflation rose from three per cent in October to 3.1 per cent last month – its highest rate since March 2012.
The rise of annual CPI inflation to more than one percentage point above the two per cent target set for the Bank of England by the Treasury triggers an explanatory letter from Governor Mark Carney to Chancellor Philip Hammond. The Bank of England said yesterday that this letter would be published alongside its next quarterly inflation report on February 8.
Economists had predicted an annual CPI inflation rate of three per cent for November.
Annual CPI inflation has surged from just 0.3 per cent in May last year, just ahead of the European Union membership referendum the following month, as sterling’s post-Brexit vote weakness has played a major part in increasing the cost of living. The surge in inflation has led to a renewed real-terms fall in pay.
Industry figures published today show the value of Scottish retail sales in November was down by 0.6 per cent on the same month of last year. This followed a 0.8 per cent year-on-year drop in October.
The Scottish Retail Consortium figures show the value of non-food sales north of the Border in November was down by 4.4 per cent on the same month of last year.
Food sales value last month was up by 4.2 per cent on November 2016 but this was driven in large part by inflation.
Ewan MacDonald-Russell, head of policy and external affairs at the SRC, said: “Black Friday wasn’t enough to boost November’s Scottish retail sales. Despite that week’s sales being 40 per cent higher than the November average, it wasn’t enough to help beleaguered high street stores match last year’s performance.”
He added: “These are the final sales figures before Christmas, and they will leave Scottish retailers feeling very nervous about what is now a make-or-break December. With that in mind, the Scottish Government need to be mindful of fragile business and consumer confidence when announcing their Budget later this week.”
Kate Smith, head of pensions at Aegon, said of the inflation data: “The consensus was that inflation had peaked so [the] figures are about as welcome as a burst water pipe. This year household finances have been under far more pressure from the rising cost of living than in any recent years, driven by the fall in the value of sterling.”
Liz Cameron, chief executive of Scottish Chambers of Commerce, said: “The squeeze on household incomes is expected to continue and tighten with inflation at 3.1 per cent.”
The inflation figures show air fares fell by less between October and November than at the same time last year, and this was the largest upward effect on the annual rate.
The ONS observed that rising prices for a range of recreational and cultural goods and services, “most notably computer games”, also had an upward effect on the annual CPI inflation rate.
Royal Bank of Scotland chief economist Stephen Boyle said: “The current [inflation] burst is largely down to sterling’s depreciation.”
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