Inflation Takes a Hike

Inflation has hit 2.7% as the rising cost of raw materials for businesses continues to filter down through supply chains. The figure is up from 2.3% in March and is now at its highest point since since September 2013. A spokesperson for the Office for National Statistics put much of the rise in the Consumer Price Index (CPI) down to the cost of air travel as Easter – a time when air fares are traditionally raised – fell during April this year. Last year Easter was in March. However, the rising costs of electricity and clothing also contributed to the rising figure.
 
The figures come on the back of a warning from the Bank of England last week that inflation will likely peak at just below 3% this year. The Bank’s target inflation rate is 2%. This also means that inflation continues to hover above earnings growth, which sat at 2.3% in February, although new figures are expected later this morning.
 
Responding to the figures, Scott Bowman – UK economist at Capital Economics – struck a fairly positive note, saying ‘the sharp rise this month was mainly due to factors that, while they won’t be reversed, shouldn’t be repeated’. He was referring to the rise in vehicle excise duty and tax hikes on tobacco and alcohol.