The Office of National Statistics (ONS) recently reported a 2.8% 12-month inflation rate for the Consumer Prices Index including owner occupiers’ housing costs (CPHI) for September 2017. As the highest rate in more than five years, this number has made headlines; potentially more alarming are reported inflation numbers for particular sub categories of everyday household expense items.
Categories With Largest Price Rises
Digging deeper into the data exposes a number of products with exceptionally large price increases. In particular, consumers are paying 21% more for butter, 20% more for fresh, chilled fish, 14% more for bus and coach transport, 14% more for books (up to 76% more for e-book downloads/binding) and 13% more for car insurance.
In the following table you can see a list of products that cost over 5% more than they did a year ago.
|Category||Percentage Price Increase in Past Year (%)|
|Binding services and e-book downloads||76.5|
|Fresh or chilled fish||20.8|
|Oils and fats||14.9|
|Passenger transport by bus and coach||14.1|
|All Fish (fresh, chilled and frozen)||13.6|
|Motor vehicle insurance||12.9|
|Fixed telephone equipment||12.1|
|Pizza and quiche||11.5|
|Equipment for the reception, recording and reproduction of sound and vision||11.4|
|Holiday centres, camping sites, youth hostels and similar accommodation services||11.1|
|Boats, outboard motors and fitting out of boats||11.0|
|Coffee machines, tea makers and similar appliances||9.9|
|Driving lessons, test licences and road worthiness tests||9.5|
|Table linen and bathroom linen||9.0|
|Margarine and other vegetable fats||8.6|
|Refrigerators, freezers and fridge-freezers||7.9|
|Books, newspapers and stationery||7.1|
|Dried fruit and nuts||6.8|
|Garments for infants (0-2) and children (3-13)||6.3|
|Furniture and furnishings||6.3|
|Clocks and watches||5.5|
|Dried, salted or smoked meat||5.4|
|Pregnancy tests and mechanical contraceptive devices||5.4|
|Lamb and goat meat||5.3|
|Cinemas, theatres, concerts||5.2|
|Edible ices and ice cream||5.1|
|Clothes washing machines, clothes drying machines and dish washing machines||5.1|
Depreciation of the Pound
One factor contributing to rising prices is the depreciation of the pound. While some UK businesses were buffered by exchange rate protections a year ago, these protections are typically short-term instruments and have now expired. By the spring of 2017 these protections had largely run out, according to the ONS, so consumers are now feeling the pass-through effect of rising import prices.
Looking at FX changes over a similar time period as the CPIH window, comparing September 2016 to September 2017 the GBP lost 4.6% against the euro. Given 53% of UK imports came from the EU in 2016, consumers are certainly paying more for common household expenditures due to the devaluation of the pound.
Depending on where you spend your household budget, you may be experiencing much higher price increases in some categories than the overall 2.8% year-on-year inflation number.