British inflation 'jumps to 1.9%'

LONDON (AFP) - Annual inflation in recession-hit Britain climbed to a higher-than-expected 1.9 percent in November owing to rising fuel prices, official data showed on Tuesday.

Consumer Prices Index (CPI) inflation increased by 0.3 percent in November from October, the Office for National Statistics said in a statement.

"CPI annual inflation -- the government's target measure -- was 1.9 percent in November, up from 1.5 percent in October," the ONS said.

Analysts' consensus forecast had been for a rise in annual inflation to 1.8 percent.

"By far the largest upward pressure affecting the change in the CPI annual rate came from transport," noted the ONS.

"Within the transport category the largest upward effect came from fuels and lubricants, where prices rose by 2.8 percent between October and November this year but fell by a record 8.3 percent a year ago.

"The large fall in 2008 was due to sharp falls in petrol and diesel prices, reflecting the falling price of crude oil in the latter half of 2008," added the statistics office.

Annual British inflation had risen for the first time in eight months during October, when it reached 1.5 percent on differences in fuel prices.

The Bank of England, which had forecast a sharp spike in British annual inflation before the end of 2009, predicts the level to fall back to about one percent in late 2010.

The BoE's chief task is to keep 12-month CPI inflation close to a 2.0-percent target.

Inflation is set to rise further in early 2010 owing to an increase in value-added tax (VAT) on goods and services.

The government slashed VAT to 15.0 percent last December to help boost consumer spending amid Britain's deep recession. However, the VAT rate returns to its pre-recession level of 17.5 percent in January 2010.

"Headline CPI is likely to rise sharply over the next couple of months to above three percent as the annual energy price comparison becomes less favourable and the VAT hike to 17.5 percent from 15 percent feeds through into price levels," ING banking group economist James Knightley said following Tuesday's data.

The annual inflation rate had slid to 1.1 percent in September, the lowest level for five years as energy prices steadied.

Britain is meanwhile the last major world power in recession, after the eurozone, France, Germany, Japan and the United States all returned to growth in the wake of the worst global economic downturn since the 1930s.

British finance minister Alistair Darling last week admitted that Britain's longest recession on record would be deeper than thought -- with the economy predicted to shrink 4.75 percent this year compared with a previous official estimate of 3.5 percent.

The economy is expected to grow by 1.0-1.5 percent next year, Darling added, matching his earlier forecast.