UK inflation picks up amid higher clothing & food prices

UK inflation has edged up to 0.7% in October.

The inflation rose from 0.5% in September and was pushed up by rising clothing prices, food, and second-hand cars.

Clothing prices rose by 2.8%, whilst the price of food increased by 0.1% between September and October.

Jonathan Athow from the Office for National 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.”

The cost of second-hand cars also edged up as people are avoiding the use of public transport. The ONS said:

“Prices for second-hand cars have risen by 1.4% between September and October 2020, compared with a 0.2% fall between the same two months a year ago.

“This upward movement continues from last month, which is reported to be because of increased demand for used cars as people seek alternatives to public transport.”

Tom Stevenson, investment director for personal investing at Fidelity International, commented on the latest statistics from the ONS and explained the impact that a vaccine would have, saying:

“Inflation crept up to 0.7% in October on the back of slightly higher food. While prices are on an upwards path, rises are likely to be subdued for a while longer. Covid infections are still increasing, large swathes of the UK are under strict lockdown rules, restricting opportunities to spend, and unemployment is climbing. This is not a recipe for inflation reaching its 2% target any time soon.

“Further out, however, there is light at the end of the tunnel in the form of a potential vaccine. Re-opening the economy will rekindle animal spirits. The widely-discussed shift to negative interest rates looks less likely now and this is good news for investors. The Bank of England has increased its quantitative easing programme to encourage consumer spending and investment and it should now keep its powder dry.”