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British inflation rate rises to 1.9% pushed by increased fuel prices

Updated:2009-12-16 10:19:54

Figures released on Tuesday by the British government showed the inflation rate, the Consumer Prices Index (CPI), had increased to 1.9 percent.

Figures released by the British government's Office for National Statistics (ONS) showed that inflation measured year-on-year in November was 1.9 percent, higher than expected.

The increase is largely driven by higher oil and transport prices.

In its statistical report, the ONS said: "A large upward effect came from transport, with the largest upward contribution coming from fuels and lubricants where prices rose by 2.8 percent between October and November this year compared with a fall of 8.3 percent a year ago.

"The 8.3 percent decrease was the largest monthly fall in fuels and lubricants on record and was due to sharp falls in petrol and diesel prices, reflecting the falling price of crude oil in the latter half of 2008."

The average price of petrol across the month, as recorded for the CPI, rose by 2.9 pence per litre between October and November 2009 to stand at 108.3 pence per litre.

Last year the average price of petrol fell by 9.3 pence per litre between October and November to stand at 95.2 pence per litre.

Other contributing factors in the increase were increases in secondhand car prices, long-haul air flight charges and sea transport costs. Clothing and footwear also increased (up to 6.9 percent year-on-year in November from 3.5 percent in October), but the rate of increase in food and non-alcoholic drinks fell (up 0.6percent last month compared with 1.4 percent a year ago).

This is the highest rate of inflation since May when it was 2.2percent, and is an increase of 0.4 percent on October's figures.

The Bank of England uses the CPI as its measure of inflation when it sets interest rates.

The Bank forecast that inflation would go through the 2 percent barrier in the New Year, and even expects that it might hit 3 percent. The increase of Value Added Tax from 15 percent to its 17.5 percent rate, announced by Chancellor of the Exchequer Alistair Darling in last week's pre-budget report, will certainly push inflation up when it comes into effect on January 1.

However it forecasts that it will be back down to 1.6 percent by the end of 2010, with high unemployment rates and slack in the economy acting as valves on inflationary pressures.

The Retail Price Index (RPI) measure of inflation, which includes mortgages and is often used in wage negotiations, rose into positive territory -- up to 0.3 percent from its -0.8 percent figure in October.

The Bank, in its bulletin for 2009 fourth quarter, said the rate of wage increase had slowed, and that households incomes were under pressure.

The Bank said in its bulletin for the fourth quarter: "An important component of this slower wage growth has been the recent movements in pay settlements. Average pay settlements have fallen sharply over the past year and many companies have imposed pay freezes.

"The decline has been broad-based across sectors, although the businesses that have frozen pay have tended to be smaller than average. The decline in settlements likely reflects both the weakening demand for labor and the sharp falls in official measures of inflation."

In the three months to September 2008, whole-economy annual earnings growth was 3.4 percent. In the three months to September 2009, growth was 1.2 percent.

In the private sector, which accounts for around 80 percent of employment, in the three months to September 2009, earnings grew by 0.8 percent compared with growth of 3.2 percent in the three months to September 2008.

The Bank reported that 35 percent of workers saw their pay frozen, but that only 1 percent of workers saw their pay cut.

The result is that nearly a third of workers have seen their household income drop by at least 1,200 pounds (about 1,940 U.S. dollars) a year.

About 30 per cent of manual workers and 27 percent of office workers said that their disposable income had fallen by 100 pounds(about 162 U.S. dollars) or more over the past 12 months. A further 22 percent of manual workers said that their income had fallen by between 50 (about 81 U.S. dollars) pounds and 100 pounds(about 162 U.S. dollars) a month.

The Bank said in the bulletin: "Slower wage growth and lower employment are just two of the many factors affecting the financial position of British households as a result of the recession.

"Credit conditions have tightened, financial asset prices have declined, and despite the recent increase, house prices have fallen substantially."

The Bank said the severe recession of the past year might be expected to have put the financial position of British households under considerable strain. Unemployment has risen significantly, credit conditions have tightened and many homeowners have seen their housing equity eroded. But many borrowers have also benefited significantly from the effects of lower mortgage interest rates.
 

 

Source:http://news.xinhuanet.com

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