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Thursday, November 26, 2020

Rising clothes and food prices increase inflation

The UK inflation rate rose by 0.2% between September and October according to the ONS.

Second hand cars and computer games also became more expensive whilst the cost of energy and holidays fell.

“The rate of inflation increased slightly as clothing prices grew, returning to their normal seasonal pattern after the disruption this year,” said ONS deputy statistician Jonathan Athow.

It was predicted that the rate would not change, remaining at 0.7%.

The price of clothes and shoes normally falls between June and July during the summer sales period before rising towards the end of the year, before the winter sales come in.

Throughout 2020 inflation has differed from the norm thanks to lockdown, for example there was increased discounting in March and April as a result of the first lockdown.

Food prices have risen since lockdown was imposed, largely due to a return to the panic buying and hoarding behaviour we saw in the first lockdown.

Food price inflation is only predicted to get worse during November as demand continues to increase.

Second hand car prices saw an increase as demand increased in response to Government guidelines to avoid public transport.

However according to Samuel Tombs, chief UK economist for Pantheon Macroeconomics, prices may fall again once a vaccine becomes more widely available.

The greatest downward pressure on inflation came from the energy sector with a fall in household energy costs.

The price of gas dropped by 12.3% with electricity falling 3.2% between September and October.

This trend was largely due to Ofgem’s latest six month price cap on energy, which began on October 1st.

Sources:

https://www.bbc.co.uk/news/uk-54984097

https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/october2020

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