Belfast Telegraph

Sterling's slump and timing of Easter drive inflation to new high

By Staff Reporter

Inflation reached a three-and-a-half-year high last month as the Brexit-hit pound and the timing of the Easter holidays pushed up the cost of living.

The Office for National Statistics said the Consumer Price Index (CPI) measure of inflation reached 2.7% in April, the highest rate since September 2013.

The rise keeps the rate above the Bank of England's 2% target and comes after CPI paused at 2.3% in February and March.

The Bank said in its inflation report that CPI would peak at 3% later this year as the pound's slump since the Brexit vote causes price tags on everyday items to climb higher.

Danske Banke economist Conor Lambe said the timing of Easter had led to higher prices for air travel during the month, with rising prices for clothes and electricity also adding to the pressure on inflation.

"UK inflation has not been this high since September 2013 and it will continue to exert some pressure on households' spending power," he stressed.

But he added that the Bank of England was still unlikely to increase interest rates from their 0.25% low.

"Despite the fact that inflation is now even further above the Bank of England's 2% target, I still expect interest rates to remain at their current low level for some time yet, given the slowdown in economic growth observed in the first quarter of this year, the pressure on real wage growth and the upcoming Brexit negotiations," he said.

Dr Esmond Birnie, senior economist at the Ulster University's Economic Policy Centre, said lower fuel prices at the pumps and cheaper computer games had acted to reduce the upward pressure on inflation. However, the overall inflation trend could present concerns for the trajectory of the Northern Ireland economy.

"The Economic Policy Centre has noted how far recent economic growth in Northern Ireland has been driven by consumer spending," Mr Birnie said.

"Such spending will get harder to maintain as inflation remains above 2%, and perhaps goes even higher, and so cuts into the growth of wages and living standards in real terms."

But despite the trend towards rising inflation, the Danske Bank Consumer Confidence Index this week recorded growing buoyancy in mood among consumers.

Confidence was at its highest since the third quarter of 2015.

Members of the public surveyed said they were more positive about what their financial position might hold in the next 12 months, and about how much they would be able to spend on high-value items.

Belfast Telegraph