INFLATION in the UK bounced higher last month as the price of clothes and food increased, according to official figures.
The Office for National Statistics (ONS) said Consumer Prices Index (CPI) inflation rose to 0.7% in October, up from 0.5% in September.
The inflation rate surpassed the expectations of analysts, who had predicted that inflation would stay flat at 0.5% for the month.
The latest figures come after the inflation rate plunged from 1% to 0.2% in August due to the Eat Out to Help Out scheme.
This represented the lowest level of CPI inflation, which measures how prices have changed over a year, since December 2015.
Clothes and shoe prices typically fall each year between June and July in summer sales as retailers prepare for autumn ranges to come in, and then rise before sales towards the end of the year, the ONS said.
However, throughout 2020 this pattern has been different, with increased sales in March and April, which is likely a result of lockdown, it added.
Why does inflation matter?
INFLATION is a measure of the cost of living. It looks at how much the price of goods, such as food or televisions, and services, such as haircuts or train tickets, has changed over time.
Usually people measure inflation by comparing the cost of things today with how much they cost a year ago. The average increase in prices is known as the inflation rate.
The government sets an inflation target of 2%.
If inflation is too high or it moves around a lot, the Bank of England says it is hard for businesses to set the right prices and for people to plan their spending.
High inflation rates also means people are having to spend more, while savings are likely to be eroded as the cost of goods is more than the interest we’re earning.
Low inflation, on the other hand, means lower prices and a greater likelihood of interest rates on savings beating the inflation rate.
But if inflation is too low some people may put off spending because they expect prices to fall. And if everybody reduced their spending then companies could fail and people might lose their jobs.
Following a smaller rise between July and August, clothing prices in October then rose by more than a year ago.
Elsewhere, the Consumer Prices Index including housing costs (CPIH) measure of inflation rose to 0.9% in October, up from 0.7% in September.
Jonathan Athow, deputy national statistician for economic statistics at the ONS said: “The rate of inflation increased slightly as clothing prices grew, returning to their normal seasonal pattern after the disruption this year.
“The cost of food also nudged up while second-hand cars and computer games also all saw price rises.
“These were partially offset by falls in the cost of energy and holidays.”
While Tom Stevenson, investment director at Fidelity International, said: “While prices are on an upwards path, rises are likely to be subdued for a while longer.
“Covid infections are still increasing, large swathes of the UK are under strict lockdown rules, restricting opportunities to spend, and unemployment is climbing.
“This is not a recipe for inflation reaching its 2% target any time soon.”
However, in good news for savers, they can still beat inflation with “the smallest amount of effort”, said Sarah Coles, personal finance analyst at Hargreaves Lansdown.
The best easy access account currently pays an interest rate of 0.75%, while the best one year bond offers 1.08%.
If you can afford to lock away your cash for up to five years, you can earn interest of up to 1.5%.
Meanwhile, the average easy access account offers a lower 0.22% and the average one-year bond is at a record low of 0.61%.
Ms Coles added: “The trouble is that when rates are this low, we can’t be bothered to put even a tiny iota of effort into switching accounts.
“When we asked people why they weren’t switching more often, 48% of people said rates were too low to bother with, 16% said it was too much hassle, and 11% said they probably should, but they couldn’t be bothered.
“But there’s a still an enormous difference between the best and worst rates around – you can earn 75 times more in a competitive easy access account than with a high street giant paying 0.01%.”
Looking to boost your rainy day fund? We take a look at the best paying savings accounts on the market.