Published: Wed, May 17, 2017
Science | By Hubert Green

UK consumer inflation rises to 3 ½-year high of 2.7 percent

UK consumer inflation rises to 3 ½-year high of 2.7 percent

The price of an average house in London is now around 2 per cent lower than in July 2016, according to the data.

The main upward impact on the cost of living came from air fares, which jumped by 18.6 per cent month-on-month in April due to the impact of the Easter holidays.

These included the rise in Vehicle Excise Duty, still described by most people as road tax, as well as increases in alcohol and tobacco duty.

The retail price index, which is no longer used as an official measure of inflation but is used for some inflation-linked bonds, increased to 3.5 per cent from 3.1 per cent.

Businesses are under similar pressure after more figures showed the cost of raw materials jumping 16.6% on past year thanks to the pound's fall, although, so far, factory gate prices have risen just 3.6%.

The opposition Labour Party on Tuesday sought to highlight rising costs for voters as it launched its policy proposals for the June 8 election, pledging a higher minimum wage and state involvement in the energy sector to keep prices down.

"Bank of England policymakers predict inflation will peak at a little below 3% in the fourth quarter".

It means inflation is now outstripping wage growth, which rose by 2.3% in the year to February.

Michael Hewson, chief market analyst at CMC Markets UK, said sterling had struggled to make gains despite the latest CPI data. Monthly inflation was forecast to halve to 0.2%.

Month-on-month, output price inflation held steady at 0.4%. While we believe we have seen the majority of the falls in the pound following the Brexit result, the knock-on effects of higher import prices will continue to be felt for some time.

Some economists argue there were other one-off factors that contributed to the rise in inflation in April.

The BoE also edged down its GDP forecast for the United Kingdom this year to 1.9% from 2%, but raised it by 0.1 percentage point for 2018 and 2019, However, it cautioned that projections were contingent on the United Kingdom achieving a "smooth" exit from the European Union.

And budget airline Easyjet posted a £236m loss for the six months to the end of March compared to £18m in the same period a year ago.

Inflation in the month was driven by rising transport costs, with fuel a large contributor.

It is also worth noting that core inflation rose. Housing inflation was at 4.86 per cent compared to 4.96 over the same period. "Inflation is set to rise to around 3pc or higher in the months ahead - with prices likely to be rising faster than wages in the months ahead". "Despite inflation overshooting estimates, the pound was unmoved against the dollar", he said.

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