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Inflation at 3.1% means a costly Christmas

Commenting on todays inflation figures from the ONS, Laith Khalaf, Senior Analyst, Hargreaves Lansdown:

"It’s going to be a costly Christmas for many, with prices significantly higher than last year, and wages falling behind. That’s particularly the case given that inflation is evident across all categories of festive fare, namely food, alcohol, clothing and recreation.

The good news is that the inflationary spike is largely a consequence of weaker sterling, which should start to feed out of the equation as we move into next year. That is unless there is a further devaluation of the pound, though the Bank of England’s recent interest rate rise, combined with some apparent progress in the Brexit negotiations, have provided some support to sterling.

The Bank of England also thinks we’ll get some real wage growth next year, though given we have had such poor progress on pay despite record levels of employment, it’s probably best not to count too many chickens before they’re hatched.

The retail sector will no doubt be on tenterhooks to find out whether consumers tighten their belts this Christmas, or simply splash out on festive products despite higher prices. We’ll get a good picture on that front from the Christmas trading updates that start to be published in January."