UK Consumer Prices - Higher Fuel Costs Push Up the Index

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 2.3% in May 2018, up from 2.2% in April 2018.

Rising motor fuel prices produced the largest upward contribution to the change in the rate between April and May 2018.

There were also large upward effects from air and sea fares, which rose between April and May this year but fell between the same two months a year ago, influenced by the timing of Easter.

Partially offsetting downward effects came from price changes for games, domestic electricity, food and non-alcoholic beverages, and furniture and furnishings.

The Consumer Prices Index (CPI) 12-month rate was 2.4% in May 2018, unchanged from April 2018.

Image: Fuel Prices have jumped recently.

The Institute of Directors take:

The Office for National Statistics has confirmed that inflation remained at 2.4% in May. It said the 3.8% rise in fuel prices – the biggest monthly jump since January 2011 – precluded a fall in inflation. 

Inflation has been falling since November 2017. 

The Bank of England’s Monetary Policy Committee will take the latest inflation figures into account when it meets next month. There is debate amongst economists over whether the Bank will raise interest rates. 

Responding to the latest inflation statistics, the IoD’s Senior Economist Tej Parikh said plateauing inflation will likely be “frustrating” for businesses and households alike. The drop in wage growth combined with an increase in fuel prices “remind us that the cost of living remains strained”. 

The figures are “unlikely to alter the Bank of England’s likely strategy to ‘wait and see’ for more data”, he added.

An increase in oil prices also led to a 9.2% rise in the cost of raw materials for businesses. 

The news follows as the ONS reported that wage growth slowed in the three months to April. 

ABC Comment: Higher fuel prices, are you feeling the squeeze?