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Inflation rate static despite rising fuel costs but food and fashion prices fall

By Ben Woods

Published 15/06/2016

Brexit warning: Mark Carney
Brexit warning: Mark Carney

Inflation was unchanged last month after a rise in the cost of hotel bills and transport was offset by falling clothes and food prices, according to the latest official figures.

The Office for National Statistics (ONS) said Consumer Price Index (CPI) inflation was 0.3% in May, the same rate as April, when it fell for the first time since last September.

Transport costs climbed 0.9% last month, as the price of diesel stepped up 3p per litre this year compared to 1.5p in 2015. Rising sea fares also had an upward impact, picking up slightly after falling a year ago.

The cost of restaurants and hotel bookings were also on the rise, climbing 0.5% in May compared with 0.2% in the same month a year ago.

The price of an overnight stay in a hotel rose more in May than it did last year.

But these rising prices were pegged back overall, as shoppers saw food and non-alcoholic beverages drop 0.4% between April and May, with the cost of vegetables and confectionery edging down slightly.

Clothing and footwear price tags were also easing back, down 0.2% between April and May, with a small impact coming from the falling cost of children's clothes.

The price of petrol rose by 2.8p per litre between April and May to 108.7p a litre.

Howard Archer, chief European and UK economist for IHS Economics, said the rising oil price also put upward pressure on inflation.

"There was a modest upward impact on inflation in May from higher petrol prices as a result of oil prices reaching 2016 highs," he added. "However, the upward impact of this was limited by the fact that oil prices also firmed in May 2015."

Economists were expecting CPI to bounce back last month, but remain below the 15-month high of 0.5% seen in March.

The ONS said that the Retail Prices Index - a separate measure of inflation, which includes housing costs - rose to 1.4% in May from 1.3% in April.

It came as the Bank of England and its Governor Mark Carney continued to sound alarm bells over a potential British exit from the European Union, warning last month that it could "materially" hit growth and trigger a "technical recession".

The Bank's Monetary Policy Committee is expected to vote unanimously to keep rates on hold at 0.5% when it publishes its minutes tomorrow.

Economic growth slowed to 0.4% in the first three months of 2016, down from 0.6% in the fourth quarter of last year, following an industrial slump.

Belfast Telegraph

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