Source Credit : CNBC
In April, the United Kingdom's annual inflation rate rose to 3.5%, surpassing analysts' expectations, as reported by the Office for National Statistics (ONS) on Wednesday. Economists surveyed by Reuters had predicted that the consumer price index would increase to 3.3% for the twelve months leading up to April.
The most recent data release reflects a notable trend of easing inflation, with the rate of price increases decelerating to 2.8% in February and further declining to 2.6% in March. Meanwhile, core inflation— which excludes the more volatile categories of energy, food, alcohol, and tobacco—registered a year-over-year increase of 3.8% in April, up from 3.4% in March. This shift in inflationary pressures highlights the evolving economic landscape and warrants close attention from policymakers and analysts alike.
According to a press release from the Office for National Statistics (ONS), the most significant upward contributions to the monthly change in the inflation rate were observed in the sectors of housing and household services, transportation, and recreation and culture. Conversely, the largest downward contribution, which partially offset these increases, originated from the clothing and footwear sector.
Recent data reveals mounting pressures on British households, with electricity, gas, and other fuel prices experiencing a significant increase of 6.7% in the year leading up to April. Additionally, the cost of water and sewerage surged by 26.1% in the month preceding April, representing the most substantial monthly rise since at least February 1988, according to the Office for National Statistics (ONS). This alarming trend underscores the growing financial strain faced by consumers in the current economic climate.
On Wednesday, British Chancellor Rachel Reeves expressed her disappointment regarding the latest economic data, noting that "cost of living pressures continue to burden working individuals."
Economists had anticipated this increase, primarily attributing it to the recent adjustment of the energy price cap—the maximum amount that energy suppliers are permitted to charge consumers. Additionally, several one-time factors contributed to this rise, including the domestic business tax increases implemented in April, the impact of the Easter holidays, and the favorable weather conditions experienced recently.
The data is likely to be disappointing for the Labour government, which has been striving to alleviate the cost of living pressures faced by British consumers. Additionally, this information will provide valuable insights for policymakers at the Bank of England, particularly in light of their recent decision to reduce the key interest rate to 4.25% during their meeting in early May.
The latest inflation data could “cause a bit of a stink” at the central bank, Nicholas Hyett, investment manager at broker Wealth Club, said Wednesday.
“Two members of the MPC [monetary policy committee] wanted to leave rates unchanged, and may well feel vindicated by today’s number. Higher core inflation will be particularly concerning since this measure of domestically generated inflation should be easier for the Bank to influence,” he said.
