Belfast Telegraph

Friday 29 August 2014

Rising commodity prices push up the cost of living

Food bills increased at the fastest pace in nearly two years last month as volatile commodity prices continued to lift the cost of living in the UK.

Food inflation hit a 23-month high of 4.9% in May, up from 4.7% in April, according to the British Retail Consortium (BRC).

The rising costs of raw materials - wheat was up 72% and oil was 50% higher - have been driven by dry weather and demand from emerging markets such as China.

The rise increased pressure on hard pressed consumers and comes amid news that Scottish Power will hike its average gas price by 19% and electricity by 10% - probably sparking rises in other energy providers.

The gloom was added to by news that air fares were increasing because of the soaring cost of oil, possibly bringing an end to the days of cheap foreign travel.

And pensioners are among those hardest hit with older people cutting back on food to stay warm when it is cold and others using less than half their winter fuel payment for heating, the Institute for Fiscal Studies said.

Elsewhere, overall shop price inflation slowed to 2.3% in May from 2.5% in April as weak UK demand saw non-food inflation, on items such as clothing and electricals, slow to 0.8% from 1.2%.

Policymakers at the Bank of England have been faced with soaring inflation in recent months with the consumer prices index rate hitting 4.5% in April, its highest level in two-and-a-half years.

The bank expects inflation to hit 5% this year before gradually dropping back to the Government's target of 2%, but further increases will prompt calls for an interest rate hike.

However the bank is unlikely to act as official figures and surveys indicate the economic recovery in the UK is faltering.

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