UK inflation at three-decade high, rising fashion prices make an impact
Consumer prices for British shoppers rose again in January, increasing at their fastest annual pace in almost three decades, with the prices of clothing and footwear influencing the rise, alongside other higher costs.
The UK's official data body – the Office for National Statistics – said on Wednesday that inflation in January was 5.5%, an increase on the 5.4% seen in December. This was despite analyst expectations that the January figure would match that of the previous month.
As mentioned, the fashion sector was a factor in rising prices and this was particularly significant given that January is traditionally a month in which clothing, accessory and footwear prices fall as companies launch their clearance sales. The ONS said that we still saw the traditional price drops but they were the smallest in 32 years.
Fashion companies have been passing higher prices on to consumers as their own costs have ballooned. Not only are materials prices rising, but the cost of getting goods onto physical or digital shelves is higher as shipping charges rise.
And expectations are that inflation will continue to increase with predictions from the Bank of England that the figure will reach 7.25% in April. The bank has an inflation target of 2% – a figure that it has been much easier to keep to for several decades now. However, the central bank isn't expecting to achieve this target for another two years, although some economists have predicted an earlier return to 2%.
It all means that one of the main weapons to combat inflation, a higher interest rate, is likely to be deployed again more than once this year. That would be bad news for companies with heavy debt loads, which includes many prominent businesses after the pandemic forced them to take on more borrowing. It would push up the cost of servicing their debts.
As for consumers, if they start to see higher prices for essentials and major costs (such as their mortgages) rising, they may be less likely to buy non-essentials like fashion and beauty.
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