Clothing prices rise for first time since 1990s
The Office for National Statistics said the annual rate of clothing and footwear inflation was 0.9 per cent in September, the first rise since 1992.
Prices rose by 6.4 per cent between August and September, the largest increase for that period since records began, as shopkeepers put up the prices of their Autumn clothing ranges and started to prepare for next year's increase in VAT.
This rise in prices on the high street helped keep the overall level of inflation stubbornly high at 3.1 per cent. The higher costs in clothes offset a decline in air fares and petrol prices. The Consumer Prices Index rate of inflation has now stayed unchanged at 3.1 per cent for three months, above the Government's targe of 2 per cent.
The monthly hike in clothing prices was driven by women's outerwear – such as winter coats – where prices increased with the new autumn season, as summer sales ended, the ONS said.
Most of the major retailers, including Next and Primark, have warned that prices will have to rise next year to accommodate VAT moving from 17.5 per cent to 20 per cent; a weak exchange rate and higher shipping costs from China.
The exchange rate is crucial for British retailers because the great majority of clothes are bought from the Far East, particularly China and Bangladesh in dollars, but sold in Britain in sterling.
Retailers such as Primark, which sells £2 T-shirts and five pairs of socks for £2, have made a name for themselves by offering cheap clothing by using Far East sourcing.
Sarah Peters, senior retail analyst at Verdict, said the increase in clothing bills was down to the weakness of the pound, increased cotton prices – which are now at a 15 year high – and higher transport costs.
She said: "Retailers have already squeezed margins as much as they can and they have little option now but to put prices up.
"Moreover, prices are likely to increase even more over the next six months due to the VAT increase to 20 per cent."
Ms Peters said rising wages in traditionally cheaper labour markets – such as China and India – were also having a slight impact on prices and would become a more prominent factor in the months ahead.
Jonathan Loynes, chief European economist at Capital Economics, said the rise in clothing prices may have also come about because retailers were introducing the VAT increase a few months early.
Supermarket shoppers paid more for their meat and fruit in September, which lifted the overall cost of food bills by 0.1 per cent. But the ONS said this compared with a drop in prices a year ago, when supermarkets were rolling out sales across a range of products.
The ONS said bread and cereal prices did not show any significant movement, which suggested the impact of droughts in Russia and the country's subsequent ban on grain exports was yet to filter through to British prices.
