Inflation to hit 1.9 per cent for January as London businesses battle fastest cost rise since 2008
Consumer price inflation is expected to reach 1.9 per cent in January, taking it to its highest level since June 2014.
It comes as businesses in the capital have faced the fastest rise in input costs for more than eight years during January.
IHS Global Insight forecasts a third successive marked increase for the Consumer Price Index (CPI) ahead of official figures being released tomorrow. That has been driven by higher fuel and food prices last month; with the former hitting a two-year high during January.
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Howard Archer, chief UK and European economist at IHS Global Insight, said some price rises might be offset following “aggressive discounting” from retailers in the January sales “after disappointing sales at the end of the year”.
Eurozone consumer price inflation rose to 1.8 per cent in January from 1.1 per cent in December, due to steep increases in both energy and food prices.
And according to Lloyds Bank’s latest regional purchasing managers’ index (PMI), higher prices for fuel and a weak pound have resulted in average costs rising at the fastest pace since September 2008 for firms in the capital.
London’s businesses have passed on the cost to customers in the form of raised prices.
Business activity growth slowed slightly; the London PMI registered 54.5 in January, down from 56.1 in December. Any reading over 50 signifies growth. The rate of job creation in the capital has also slowed, recording a small rise in employment numbers throughout the month.
Output growth across London remained strong last month, though it was below the UK average, and a similar story for levels of new business.
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Paul Evans, regional director for London at Lloyds Bank Commercial Banking, said:
London’s businesses are being hit by fast-rising input costs. We’ve seen both manufacturers and service providers shoulder this extra expense, which has contributed to a slowdown in job creation.
Despite this, January has been a positive start to the year for the capital.
Business activity has been boosted by a rising demand for goods and services, which is an encouraging signal for the year ahead.
Rising air fares and food prices drove UK inflation up in December, with the annual rate of CPI inflation up to 1.6 per cent for the month. That was an increase on the 1.2 per cent recorded for November, the Office for National Statistics (ONS) said.
Higher costs for imported materials and fuels pushed up producer prices too.