Inflation hit the highest level in four years during April, beating forecasts and likely ending a two-year period of real wage growth according to the latest inflation figures from the Office for National Statistics.
Prices were 2.7 per cent higher than the same month a year ago, up from 2.3 per cent during March. The latest labour market data found that wages grew by 2.3 per cent in the three months to February.
The jump in inflation was mainly driven by air fares – they increase during the Easter holidays, which this year fell in April rather than March. Analysts had expected inflation to increase to 2.6 per cent.
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.
Stagnant living standards have been the post-financial crisis norm in the UK, except for a brief period when falling oil prices helped to lift incomes in real terms. The latest data suggest that this growth is now over.
Clothing and electricity prices also rose at a faster rate during April while changes to certain car taxes also helped to push up the rate of inflation.
The rate of inflation is now above the Bank of England’s 2.65 per cent forecast for the entirety of the second quarter of 2017.
Input prices, a measure of the costs faced by businesses, grew by 16.6 per cent during the month. This is the third consecutive month of slowing growth since the cost inflation peaked at 19.9 per cent in January.
Increases have been mainly driven by crude oil as the effect of a fall in the price drops out of the figures but sterling’s weakness since the EU referendum has also helped drive up import prices.
An increase in the value of the pound since a snap general election was called has helped to moderate some of this effect.
The ONS also found that inner London house prices have fallen sharply in recent months. The price of an average house in London is now around 2 per cent lower than in July 2016, according to the data.
– The Financial Times
