Inflation hits 2.9% as fuel and clothing costs grow

British inflation jumps pushing pound to one-year dollar high

Fuel inflation remained almost flat, witnessing 4.94 percent growth in August, as compared with 4.84 percent in July.

Having dropped back to 2.6 per cent in June and remained at that level in July, the consumer prices index (CPI) inflation figure is now back at the level reached in May.

The rise in August was higher than the 3.20% forecast by economists in a Reuters poll.

On the news, the pound also went up against the dollar by 0.7 per cent, while it went up by 0.6 per against the euro.

While the overall primary goods category of IIP grew 2.3% in July, rebounding from a contraction of 0.2% in June, the capital goods sector continued to contract, shrinking by 1% in July following June's 6.8% contraction.

India's industrial production increased 1.2 percent year-on-year in July, which was in line with the market consensus.

"Conversely, these effects were partially offset by airfares, which rose more slowly than during last year's summer holidays".

Clothing and footwear prices rose at the fastest pace since the CPI series began in 1997, up 4.6% annually in August.

The move was partly driven by rising import costs for retailers linked to sterling's slump following the Brexit vote.

The ONS added: "The increase in clothing price inflation may be partly associated with the lagged response to the depreciation of sterling during 2016 as supply contracts with overseas producers may now be renewed on different terms".

Likewise, prepared meals, snacks and candies as a category turned dearer with the rate of price rise at 1.96 per cent from 0.43 per cent in July.

However, downward pressure came from airfares, which saw smaller hikes between July and August at 10.9%, compared to a 14.4% monthly jump in 2016.

If inflation ends up being more than 1 percentage point above the target, Bank of England Governor Mark Carney will have to write a letter to the government explaining why that's happened and what he and his central bank colleagues are planning to do about it.

They showed an annual rate of 3.4% - their first increase since February - while prices paid by factories for materials and energy were up 7.4%.

However, policymakers are expected to keep the bank's benchmark interest rate at the record low of 0.25 percent at their meeting on Thursday largely because of Britain's uncertain economic outlook.

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