No change in UK inflation in November

Gas bill#

Consumer price inflation in the UK remained steady at 2.7% in November 2012, unchanged from October, official figures showed today.

The biggest price rises were recorded for bread, cereals and fruit and for household gas and electricity bills, the Office for National Statistics said. The price of sweets and chocolate bars also rose as manufacturers reduced the size of a number of products. This is treated as a price increase because consumers get less for their money, the statistics agency pointed out.

Offsetting the upward pressure from these higher prices in November were lower prices for motor fuels and air transport and for furniture, household equipment and maintenance.

Food prices are expected to rise further in the coming months because global prices for grain and other food products were pushed up after drought conditions this year in the US and Russia. UK farmers also struggled against the elements, with abnormally high rainfall in the summer which followed a drought across parts of the country during the spring.

In addition to the cost of food, energy prices will continue to put pressure on inflation as further increases in electricity and gas prices in December and January take effect.

The consumer prices index (CPI) rate of inflation remains above the Bank of England’s 2% target, although the central bank has said that it expects inflation to fall back towards the target in the second half of next year.

Howard Archer of IHS Global Insight, quoted by the Guardian, claimed that with higher energy bills and food prices, consumer price inflation could rise to 3.0% early in 2013 and remain at that level for a while.

The UK’s alternative measure of retail prices index (RPI) inflation, which includes housing costs, dropped slightly to 3.0% in November 2012, down from 3.2% in October.

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