Inflation in the United Kingdom soars to maximums from 2012

Inflation in the United Kingdom soars to maximums from 2012

Retail sales suffered an unexpectedly sharp fall of 0.8% in September, reversing a jump in August, according to the Office for National Statistics.

"This surge in inflation - which mainly reflects the fall in sterling since the EU Referendum vote - is squeezing consumers and holding back the growth of retail spending in volume terms".

On the other hand, total earnings in cash terms grew slower than prices over the last year, meaning the real value continues to fall.The combination of rising inflation and stagnating wage growth meant that real wages fell by 0.3 percent.A total of 1.4 million people were recorded unemployed at the end of August, down 215,000 on a year earlier, the ONS added.

"However, there is a continuation of the underlying trend of steady growth in sales volumes following a weak start to the year, and a background of generally rising prices", said ONS senior statistician Kate Davies.

The value of pound fell immediately after the figures were released, with sterling down nearly half a cent to $1.3126, suggesting traders believe a rate rise next month is less likely. Issues around consumer finances, spending power and rising cost pressures are already challenging the industry: "an interest rate rise could cause an additional headache for retailers in the lead up to Christmas". This was also weaker than the expected 2.1 percent.

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Electricals saw sales come in 5.6% lower during the month - the sixth consecutive month of negative growth that the sector has seen, and its first in September since the index began. "On top of that the Bank could well find its credibility compromised if it fails to follow through on its recent hawkish commentary, and would once again be on the hook for providing "forward misguidance".

Inflation looks likely to hover at 3% or just above for the rest of 2017, he noted, with earnings growth showing little sign of picking up despite the unemployment rate coming down to 4.3%.

Data on rising prices comes after the headline inflation rate hit 3 per cent this week, outstripping wage increases of 2.1 per cent.

"Moreover, consumer confidence is relatively fragile with considerable caution over making major purchases". Once inflation is taken into...

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