UK inflation rate turns positive

The UK’s inflation rate rose to 0.1 per cent in November, turning positive for the first time in four months.

The figure was released by the Office for National Statistics (ONS) and measures the rate of the Consumer Prices Index. According to the ONS, the increase is due to transport costs, alcohol and tobacco prices. 

However, the rate was partially offset by a drop in clothing prices, which fell for the first time between October and November. Clothes prices usually rise during this time of year as consumers look for Christmas gifts, while the ONS maintain they logged clothing prices before Black Friday sales discounts took effect. 

For the past ten months, monthly inflation has been between -0.1 per cent and 0.1 per cent, with oil prices decreasing and a competitive environment for supermarkets keeping prices down for consumers. 

The previous month’s inflation rate stood at 0.1 per cent, while analysts expected November’s figure to stand around zero per cent. 

Last week’s calculated UK interest rates remained unchanged, standing at 0.5 per cent. 

The nine policymakers on the Monetary Policy Committee voted eight to one for no change, with the Bank predicting that inflation will stay below one per cent until the second half of next year. 

Inflation remains below the Bank’s two per cent target and the the absence of inflationary pressures has led analysts to push back their estimates of when UK interest rates might rise. 

Chris Williamson, chief economist at data firm Markit, said: "UK inflation remained largely absent in November, and looks set to remain weaker for longer than forecasters have recently been expecting.

"Falling prices for oil and other commodities are helping drive down companies' costs. Weak wage pressures and fierce competition in the retail sector are also helping keep a lid on prices. Hence clothing prices showing a record fall between October and November."

Ben Brettell, senior economist at broker Hargreaves Lansdown, welcomed the slight 1.2 per cent rise in core inflation, a figure which measures inflation in absence of volatile components such as food and energy, but added the number was still ‘weak’. 

He continued: "This offers little suggestion that underlying inflationary pressures are building in the UK economy. Furthermore there are signs that wage growth is flattening out - figures due out tomorrow are expected to show pay growth has slowed from three per cent to 2.5 per cent.”