Highlighting the latest consumer price inflation figures, EEF (www.eef.org.uk) economist Martyn Jenkins says October’s data was ‘unmoved’ at 3% (remaining at its highest level since April 2012), while core inflation (which excludes volatile items such as energy, food, alcohol and tobacco) was also unmoved at 2.7%.

“While this does not provide any respite for ‘squeezed’ households, it is better than expected, with most economists forecasting a rise in inflation to between 3.1 and 3.2%.”

With regard to the factors behind inflation being at its highest level in five years, Mr Jenkins attributes this to the weak exchange rate.

“Following the EU referendum, sterling depreciated heavily, and it still remains 10% below its pre-referendum level.

“This has led to higher import inflation, which has been steadily filtering through to consumers over the past six months.

“On the other hand, domestically generated inflation, which is heavily influenced by wages, has been weak.”

He goes on to say that the biggest contributors to October’s inflation were food and drink, and transport (fuels), with the prices of food and drink up 4% compared to the same month a year ago; and while transport eased a bit from 4.2% to 4.0%, it remains the second-largest contributor to inflation.

With regard to manufacturers, Mr Jenkins says: “While consumers continue to be squeezed, the ‘pass through’ in sterling depreciation appears to be moderating for manufacturers, boosting their margins in the process.

In the 12 months to October, manufacturers’ input prices were up 4.6%, well below the five-year high recorded in January of 20%.

“While output price increases did ease back slightly to 2.7%, margins are under considerably less pressure than at the start of the year.

“This supports our latest Manufacturing Outlook, which suggests that manufacturers’ margins on domestic sales are in a recovery mode, with inflationary pressures through the supply chain moderating. As a result, now may be the time to start investing in greater levels of process innovation.

“This month’s inflation figure of 3% would suggest that the upward pressure is beginning to abate, with the effect of sterling depreciation becoming exhausted.

“That said, the future path of monetary policy will not be dictated by one data point, and there are a number of factors at play which will impact on the future path of inflation and interest rate setting — namely wage growth, which the Bank of England expects to improve in 2018.”