Business

With spike in food, vegetable prices, retail inflation hits seven-month high

With spike in food, vegetable prices, retail inflation hits seven-month high

According to government data released on Monday, the annual consumer inflation in October increased to 3.58 per cent from a year ago.

Retail or CPI inflation rose to 7-month high of 3.58 per cent in October, driven up by costlier food items, particularly vegetables. That was its first increase in a decade and was due to the fact that inflation has spiked sharply higher since Britain voted in June a year ago to leave the European Union, a decision that prompted a sharp fall in the value of the pound.

The increase was led by firming up of food prices with vegetables segment remaining a key stress point at this juncture, said Pankaj Patel, President, FICCI. The prices of housing has risen by 6.68 per cent followed by fuel and light at 6.36 per cent, clothing and footwear by 4.76 per cent.

Meanwhile following the latest inflation data, "there was a very slight initial drop in the value of sterling as markets anticipate that inflation may not peak beyond 3.0 percent and future interest rate rises may not therefore need to be imminent", Richard Stone, chief executive at stockbrokers The Share Centre, said in a note to clients.

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Analysts' consensus forecast had been for a slight rise in CPI to 3.1 percent.

Separately on Tuesday, data from research group Kantar showed that United Kingdom grocery price inflation for the quarter ending November 5 stood at 3.4 percent, the highest level in four years.

Higher inflation was also noted in protein rich items like oils and fats, eggs, and milk (and its products). Inflation in rural areas was 3.4%, while in urban centres it stood at 3.8%.

"We're already seeing slower rises in the costs of raw materials and prices at the factory gate, which could be a sign the inflationary spike is close to an end", said Ben Brettell, senior economist at stockbrokers Hargreaves Lansdown. Secondly, the GST Council has drastically cut the GST rates... that is likely to have a subduing effect on retail inflation in the coming months.