UK inflation ticks up in October as clothing prices rise

UK inflation edged higher in October as the price of clothing rose, according to figures released on Wednesday by the Office for National Statistics.

Consumer price inflation rose to 0.7% in October from 0.5% in September. Economists had been expecting 0.6% growth.

Meanwhile, core inflation increased to 1.5% from 1.3%, versus expectations for no change.

The largest upward contribution came from clothing and footwear, the ONS said. Clothing prices rose by 2.8% between September and October, mostly due to a rise in the price of womenswear. This compares with a 0.9% increase between the same two months a year ago.

Meanwhile, food prices edged up 0.1% compared with a 0.6% decline between the same two months a year ago, with the move higher driven mainly by fruit and vegetables.

Jonathan Athow, deputy national statistician for Economic Statistics, said: "The rate of inflation increased slightly as clothing prices grew, returning to their normal seasonal pattern after the disruption this year.

"The cost of food also nudged up, while second-hand cars and computer games also all saw price rises.

"These were partially offset by falls in the cost of energy and holidays."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said consumer price inflation looks set to hover close to 0.7% until April, when the energy component will no longer depress the headline rate and some restaurants, hotels and leisure providers will raise prices in response to the return of VAT to its usual 20% rate.

"Even in Q2, however, CPI inflation should be low, at about 1.5%, given that producer and import price inflation recently have been weak and surveys show that most services firms have little pricing power. Prices for some services, such as train fares and mobile phone contracts, also are automatically linked to past rates of inflation, causing the headline rate to be sticky.

"By the summer, when consumers likely will be going on a spending spree, there is a risk that inflation spikes for in-demand services, such as airline fares, package holidays, and restaurant meals. But this impulse should be offset by renewed declines in prices for goods, such as used cars and electronics, which have surged this year."

Tombs said he still reckons CPI inflation will not rise to the Bank of England's 2% target within the next two years, keeping the door ajar for the Monetary Policy Committee to loosen monetary policy further if the economic recovery needs more support next year.