The Office for National Statistics (ONS) has released its latest inflation figures and it’s bad news for all concerned.

The official government measure, Consumer Prices Index including owner occupiers’ housing costs (CPIH), has increased to 1.1% in July. Compared to 0.8% in June, it’s a big jump, especially considering May’s figure was only slightly lower at 0.7%.

The increase was largely due to changes in the prices of clothing, petrol, furniture and household goods.

For retail goods, it’s a case of sales patterns changing.

The ONS explained: “Ordinarily, prices for clothing and footwear experience a larger fall each year between June and July with items being placed on sale in preparation for the arrival of autumn product ranges.

“Throughout 2020, we have seen clothing and footwear prices follow a different trend compared with previous years, as we recorded increased discounting at the start of lockdown.”

Basically, it means the discounts this year haven’t been as steep as previous years and may even be less than during lockdown.

As for petrol, oil prices have recovered somewhat after their slump earlier in the year (at one point it even went negative).

You may know inflation as the measure of changing prices over time.

In this case, the cost of living is effectively 1.6% more expensive now than it was last year, under the CPIH measure.

Ordinarily this might be considered a good thing. Steady inflation can indicate a steady growth in the economy. In fact, the Bank of England has an inflation target of 2%, which it tries to maintain using various policies including the use of interest rate changes.

But given the sour state of the jobs market right now, many people’s salaries won’t be bumped up to match inflation so things will feel even more expensive.

To complicate things, the Bank of England uses the CPI measure of inflation (CPIH without the housing component) for its target. Given July’s CPI stands at 1%, the Bank of England’s aim will actually be trying to double it, albeit at a manageable and steady pace.

What it means for you…

Unfortunately, inflation is not just an indicator of the fact that prices have already gone up, it’s also an indicator of prices going up in the future so you may want to watch those pennies.

For example, this month, the Retail Price Index (RPI), an old measure of inflation, has gone up to 1.6%. While officially it “does not meet the required standard for designation as a National Statistic”, and therefore isn’t used by the government to track inflation, it is used in a number of long term contracts.

One such contract is the price of rail fares. Government regulated rail fares are allowed to rise in line with the RPI for July each year. This July it’s 1.6%, which means most rail fares are set to go up by the same percentage next January – unless the government intervenes.

Given many people are still working from home, and few are taking public transport, some have argued for cheaper fares to entice people to come back.

Realistically though, you’re not going to suddenly start commuting if you don’t need to just because the rail fare is significantly cheaper, but you might use it more for leisure. Whether that will happen remains to be seen.

Aside from watching your spending, picking a savings account that beats inflation will help too. That means finding one that offers at least 1.6% interest – otherwise you’re effectively making a loss over time.