With the weaker pound pushing up air fares and food prices, the cost of weekly shopping and jaunts abroad is on the up, not matter what your budget.
The Office For National Statistics estimates that a basket of goods and services that cost £100 in December 2015 would have cost £101.60 in December 2016. They put the rise down to “Price movements for the majority of the broad groups of goods and services.”
*Did you know: the most recent figures show that in 2014 the average food shop was £58.80, which would have meant an extra 50p a week in 2016 with these rises.*
What has happened?
The Consumer Prices Index (CPI) increased to 1.6% in the year to December 2016, the highest since July 2014– this compares to 1.2% in the year to November. Nonetheless, the annual rate remains below the Bank of England’s target and low by historical standards.
Figures show that food prices increased by 0.8% overall between November and December 2016, having fallen by 0.2 the previous year. Transport prices rose overall by 2.9% between November and December 2016, compared with 1.8% in the same period in 2015. This was mainly down to air fares, which were up by 49% (46% in 2015) and motor fuels.
*Did you know: the cost of an average train ticket has risen 16.9% in the past five years.*
What might happen next?
If inflation continues to rise, the pound drops and food prices go up further, it’s possible that the ‘BOGOF’ or promotional discounts we’re quite used to seeing in supermarkets may become fewer.
One possible outcome is that we may have to get used to being a bit more savvy with our shopping, cut down on waste, and try to buy what we need and not be tempted to get something just because it looks like a good deal.
It could also mean that the fall in interest rates that we’ve seen for almost a decade may end before too long.
Graham Spooner, investment research analyst at The Share Centre, adds: “This latest data illustrates the increasing cost of living as prices creep up. All the signs are that inflation will continue on a similar trajectory as companies pass higher costs on to consumers.”
The BBC’s Simon Gompertz said: “Also worrying is that UK manufacturers are having to pay 16% more for raw materials and fuel, the result of the drop in the pound.”
MORE: How to budget ahead – Experian’s favourite bloggers join us in giving some tips
The 2016 Money Year in review
In December we took a look back at 2016 and some of the significant things that may have affected our finances – from the introduction of the National Living Wage to the vote to leave the EU, from the Lifetime ISA to the lowering of interest rates.
Find out more about what changed for some of us last year in our 2016 Money Year In review.
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