Latest ONS data has shown that year-on-year inflation rose to 2.6% in November, up from 2.3% in October, rising for the second month in a row.
Year-on-year core Inflation (excluding food and energy) rose to 3.5% in November, up from 3.3% in October whilst , month-on-month inflation rose by 0.1% in October, down from 0.6% in October.
Fuel and clothing were among the main drivers behind the rise. Increasing ticket prices for gigs and plays were also a factor.
Commenting on the inflation figures for November, ONS Chief Economist Grant Fitzner said “Inflation rose again this month as prices of motor fuel and clothing increased this year but fell a year ago. This was partially offset by air fares, which traditionally dip at this time of year, but saw their largest drop in November since records began at the start of the century.”
George Lagarias, Chief Economist at Forvis Mazars said “The 2.6% year-on-year inflation figure which suggests a rebound, may be slightly misleading. For November prices were up just 0.1.%, a sixth of the ruse we saw in October. The Bank of England should not worry about this month’s inflation number. Instead, it should look forward into 2025, to trade wars, the Chinese economy and US pro-cyclical policy to gauge how inflation might develop in the new year and adjust monetary policy accordingly.”
Anna Leach, Chief Economist at the Institute of Directors, said “Today’s expected rise in inflation – the second in a row – largely reflects the technicality that energy prices are no longer falling as they were a year ago, as well as ongoing stickiness in services prices. Although services inflation has come in around the Bank of England’s expectations at 5.0%, it remains uncomfortably high. Meanwhile yesterday’s unexpectedly sharp rise in wage growth does not give hope that domestic inflationary pressures are well contained and moving in the right direction.
“The softening in private sector activity flagged in business surveys, reflecting tough trading conditions, low confidence and rising costs, may itself exert downward pressure on inflation over time. But how businesses respond to increases in employment costs, as well as how quickly government spending rises following the Budget, has a crucial bearing. Elevated global risks from conflicts, higher trade tariffs and the likelihood of a fiscal expansion in the US all present risks to the inflationary environment. These factors lend themselves to a watchful-hold in interest rates from the Bank of England tomorrow.”
David Bharier, Head of Research at the British Chambers of Commerce, said “A slight ticking-up of the CPI to 2.6% shows that inflation remains a threat to the UK economy. The Bank of England is likely to remain cautious and hold the interest rate tomorrow lunchtime.
“Our research shows that taxation and inflation remain the top two concerns for businesses. Many businesses think the recent announcements such as the NICs increase, and Employment Rights Bill will lead them to increase their prices as they struggle to manage input costs.
“Our latest forecast expects CPI to remain above the Bank of England’s target until the end of 2026, mainly due to increased business costs and global trade uncertainty.
“Business investment will remain challenging unless firms are given extra help to deal with rising costs. Pushing forward with business rate reform would be one crucial step to take, coupled with a clear industrial strategy to unlock growth.”
Suren Thiru, Economics Director at ICAEW said “These figures confirm that inflation continued its unwanted comeback in the aftermath of the budget, as stronger fuel and clothing costs helped pulled the headline rate further away from the Bank of England’s 2% target.
“November’s uptick means that inflation is on track to top 3% by the middle of 2025, with tax rises in the budget and elevated energy costs likely to increase the upward pressure on prices in the near term.
“The rise in core inflation will make for slightly difficult reading for policymakers, as it suggests that underlying inflationary pressures in the much of the economy are not yet fully under control.
“This inflation increase extinguishes any lingering hopes of an interest rate cut on Thursday while concerns over mounting inflation risks, including the recent spike in pay growth, mean that a February loosening is not a done deal.”