The UK’s inflation rate as measured by the Consumer Prices Index (CPI) rose to 2.9% in May, up from 2.7% in April, data published by the Office for National Statistics (ONS) has revealed.
The rising costs of package holidays and imported computer games helped to push the rate to its current level. The ONS found that food and clothing prices also rose, but fuel prices fell.
Economists had previously predicted that the rate of inflation would remain at 2.7% in May.
Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), commented: ‘Higher inflation is a key business concern as it squeezes margins and weakens their ability to invest, particularly during this time of heightened political uncertainty.
‘A key focus of the new government must therefore be on easing the current pressure on firms’ cost base by tackling the burden of upfront costs and taxes associated with doing business in the UK.’
Meanwhile, the Trades Union Congress (TUC) expressed concerns that the UK’s rising inflation rate ‘continues to far outstrip wage growth’.
Frances O’Grady, General Secretary of the TUC, warned: ‘The election showed that working people are struggling. The new government must stop the real wage slide. Ministers must focus on delivering better-paid jobs all around the UK.’
Retail sales fell by 4.4% last month, according to the latest figures from the British Retail Consortium (BRC).
The May figures represent the biggest drop in more than four years, as consumers feel the effects of rising inflation and weak wage growth.
Online sales of non-food items also grew at the slowest rate since records first began in 2012.
Meanwhile, a separate survey conducted by Barclaycard has suggested that consumer confidence reached a new low last month, with 53% of consumers reporting that they feel confident about their finances, compared with 70% in March.
According to the survey, growth in consumer spending fell to 2.8% in May, with spending on households goods and clothing falling by 2.9% when compared to the previous year, although spending on cinemas and eating out rose by 11.5% and 11.7% respectively.
Figures published by the Office for National Statistics (ONS) have revealed that the UK’s rate of inflation has risen to 2.7% – up from a rate of 2.3% in March. Inflation is now at its highest level in four years.
The new rate is also above the Bank of England’s 2% target for 2017.
Higher air fares, combined with rising prices for clothing, vehicle excise duty, electricity and food helped to push the rate of inflation to its current level.
The Bank recently warned that inflation is set to peak at ‘just below 3%’ this year. It also suggested that the UK could face a ‘consumer spending squeeze’ following the rise in inflation and with real wages falling.
Commenting on the rise in inflation, Chris Williamson, Chief Business Economist at IHS Markit, said: ‘The timing of Easter looks to have played an important role in pushing inflation higher in year-on-year terms.
‘But sterling’s depreciation since the referendum last June is also clearly a significant factor, lifting prices for imports and likely to pile further upward pressure on consumer prices in coming months.’
Data published by the Insolvency Service has revealed that the number of people applying for insolvency has risen to its highest level in nearly three years.
During the first three months of 2017, personal insolvencies in England and Wales totalled 24,531 – a rise of 6.7% when compared to the previous quarter. This also represents the highest number of personal insolvencies since 2014.
Meanwhile, there were 2,513 personal insolvencies in Scotland during the first quarter of this year. This was 11.0% higher when compared to the same quarter in 2016.
Adrian Hyde, President of insolvency and restructuring trade body R3, commented: ‘Although borrowing rates remain at record lows, rising inflation and slowing real wage growth will be limiting people’s financial room for manoeuvre.
‘Compared with where insolvency numbers were a few years ago, personal insolvency rates are still low and the recent bankruptcy rises have been very small. However, a continued gradual upwards shift may be a sign that the post-recession return of high levels of consumer borrowing and spending is starting to reach its limits.’
Government borrowing fell to £52 billion in the year to the end of March, data published by the Office for National Statistics (ONS) has revealed.
As a result, government borrowing is now at its lowest level since the 2008 financial crisis.
However, experts have stated that the fall in borrowing was helped by one-off factors, and warned that rising inflation, an ageing population and an increase in healthcare costs will continue to add pressure to public finances.
Samuel Tombs, UK Economist at Pantheon Macroeconomics, said that the Office for Budget Responsibility (OBR) ‘expects borrowing to rise to £58.3 billion this year’.
He continued: ‘The chance that the Autumn Budget contains net tax rises – like all of the last six post-election Budgets have done – is very high.’
Chancellor Philip Hammond recently hinted that the Conservative party may amend or potentially abandon its 2015 manifesto pledge not to raise income tax, national insurance or VAT.
The latest Growth Indicator published by the Confederation of British Industry (CBI) has revealed that growth in the UK’s private sector slowed in the three months to March.
Across the manufacturing, distribution and service sectors, the pace of output growth eased to +11%, down from +15%.
Additionally, while manufacturing output growth expanded in the three months to March, consumer services and retail growth slowed. Activity among business and professional services firms remained unchanged.
The Growth Indicator also suggested that firms remain optimistic: +25% of the businesses surveyed expect growth to pick up over the next quarter.
Rain Newton-Smith, Chief Economist at the CBI, commented: ‘Momentum eased towards the end of the first quarter, particularly among consumer service and retail companies. However, expectations for the quarter ahead are healthy across all sectors.
‘But headwinds are strengthening, as higher inflation drives up costs for businesses and eats into household incomes, particularly against the backdrop of subdued wage growth.’
Inflation as measured by the Consumer Price Index (CPI) rose to 2.3% in February – up from 1.8% in January, according to the latest figures from the Office for National Statistics (ONS).
This is the highest rate since September 2013 and is above the Bank of England’s target of 2%. The Bank previously said that it expects CPI inflation to peak at 2.8% next year.
The ONS has attributed the increase partly to rising fuel and food prices – the latter recording their first annual increase for more than two-and-a-half years.
The fall in the value of the pound since the Brexit vote, which makes imports more expensive, has been cited as a reason for the rise in food prices. However, the pound rose sharply after the news of the inflation rate, with Sterling rising by a cent against the dollar.
Anna Leach, Head of Economic Intelligence at the Confederation of British Industry (CBI), said: ‘While inflation has risen above the Bank of England’s 2% target, it is still relatively low by historical comparison. Nonetheless, inflation is likely to rise further still, on the back of stronger fuel prices and as the impact of the weaker exchange rate feeds through. Also, other price data indicates rising costs for businesses, with input prices up 19% on the year.’
The Retail Prices Index (RPI) measure of inflation rose to 3.2% in February from 2.6% the previous month.