Inflation On The Rise After Cost Of Food, Clothing And Energy Soars

Inflation On The Rise After Cost Of Food, Clothing And Energy Soars

Inflation rose in the UK in the twelve months to August after sharp increases in the cost of food, energy and clothing.

The Office for National Statistics said on Tuesday that the consumer-price index rose to 4.5 per cent to August 2011, up from 4.4 per cent in July.

Housing, water, gas and electricity prices rose by 5.1 per cent, the ONS said after both Scottish Power and British Gas raised their tariffs.

Scottish & Southern Energy and E.ON are set to raise their prices in October, leading to fears that CPI could continue to rise through 2011.

Furniture, household equipment and maintainance rose 5.8 per cent year-on-year, while clothing rose by 3.7 per cent between July and August. Deceleration in the rising cost of flying provided some relative downward pressure on the overall numbers, the ONS said.

The retail prices index of inflation - which includes mortgage payments and council tax - also rose, up to 5.2 per cent in the twelve months to August from 5 per cent in figures released July.

Those numbers mean that inflation is still double the Bank of England's target rate of 2 per cent, but officials there still expect it to return to its target in the next two years.

According to the bank the inflation rise is largely due to increases in VAT imposed in January and global energy prices.

Some analysts however think it is more likely that CPI inflation will post further increases in 2011.

"The rate is likely to move higher in coming months as utility bills continue to increase, putting further pressure on already-strained household budgets," Chris Williamson, chief economist at Markit, told the BBC.

"However, inflation should start to fall by the end of the year, and drop significantly next year."


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