Recent inflation rise merely a 'blip', says leading economist
The first rise in inflation for almost a year is a "blip" rather than a trend, according to a Northern Ireland economist, who predicts sunnier data ahead.
Household spending power has been dealt a further blow as inflation rose for the first time in 10 months in April, according to the latest figures from the Office for National Statistics.
Ulster Bank chief economist Richard Ramsey predicts that the inflation rise is a "blip" rather than a trend, and that the rise in the consumer prices index, or CPI, was driven higher by air and sea fares, which reflects the timing of Easter, which fell in April this year.
The good news for consumers, however, is that the 1.8% rise – up from a four-year low of 1.6% in March – was partly offset by slower food price inflation, as a mild spring kept vegetable prices down compared to last year when widespread frost killed many crops.
Despite the CPI rise, Mr Ramsey remains upbeat about the economic outlook and he points to "better than expected data" across all the major economic indicators in the past six months.
Latest figures show annual wage increases were stuck at 1.7%, meaning a hoped-for sustained period of pay rising faster than the cost of living has yet to materialise. But Mr Ramsey said "eight quarters of employment growth" signalled that things were moving in the right direction.
A 0.5% month-on-month fall in food and non-alcoholic beverages prices was welcome news for hard-pressed households, he said. The food price fall has been helped by a 10% rise in the value of sterling since last year, keeping the cost of imported goods down.
Within the food sector, the price of vegetables fell 2.3% between March and April due to a better growing season, while the price of fish dropped 3.4%.
A separate measure of inflation, the Retail Prices Index (RPI), which includes housing costs, was unchanged at 2.5%.
CPIH, a new measure which also includes housing costs, rose to 1.6%, up from 1.5% in March. Another new measure, RPIJ, was unchanged at 1.8%.
Dr Esmond Birnie, chief economist with business advisory firm PriceWaterhouseCooper in Northern Ireland, said politicians should be less concerned over the inflation rate than spiralling property prices.
"On average, we expect UK property prices to grow by 8% this year and 6% in 2015, but average London prices could grow by around 23% over the same period; that would take the average London property to almost £560,000 at the end of 2015, and up from £450,000 at the end of 2013.
"On the other hand, Northern Ireland is experiencing only marginal property price recovery and high levels of negative equity and if the banks act to curtail mortgage lending in GB, that could have an unfortunate effect here."
A Treasury spokesman said that the latest figures showed that inflation remained below the target rate and well below half of the peak in September 2011.
"Lower inflation and rising job numbers show that the Government's long-term plan is working," the spokesman said.