Official data shows inflation rises again - to 2.9%

13 Jun 17

The rate of inflation rose to 2.9% in May up from 2.7% in April, latest Office for National Statistics figures have revealed.

Inflation is now at its highest since June 2013 and remains above the Bank of England’s target of 2%, the ONS data showed.

The measure for ‘core’ inflation also rose to 2.6% from 2.2%, the ONS said. It was only expected to hit 2.4%. Core inflation is what economists see as a ‘permanent’ influences on price – not those they consider ‘transitory’ or ‘fleeting’ – and does not include energy and food prices.

Figures on earnings are due to be released tomorrow and the Resolution Foundation expects there will be a 0.5% drop in real wage growth in the three months to April.  

The think-tank has warned a sharp rise in inflation would lead to a squeeze on pay packets.  

The recent rise in inflation is due to rising prices for recreational and cultural goods and services, particularly games, toys and hobbies, according to the ONS.

There were smaller upward contributions from increased electricity and food prices but these were partially offset by falls in motor fuel prices, and air and sea fares - the latter two influenced by the timing of Easter in April this year.

A spokesman for the Treasury said: “The government is helping families with the everyday cost of living by keeping taxes low, freezing fuel duty and increasing the National Living Wage.

“A typical basic rate taxpayer now pays £1,000 less income tax than in 2010 and increases in the National Living Wage mean £1,400 extra a year for a worker since its introduction.”

The government said in April 1.3m people were taken out of income tax altogether, compared to the beginning of this parliament, and 31m individuals will see their income tax bill reduced in 2017-18 compared to 2015-16.

Stephen Clarke, economic analyst at the Resolution Foundation, said: “The latest rise in inflation adds further pressure to already shrinking pay packets.”

“The uncertain political environment, coupled with Brexit negotiations beginning in six days’ time, is already having an impact on sterling and could create further inflationary pressures down the track.”

Ashwin Kumar, chief economist at the Joseph Rowntree Foundation, also expressed concern about the jump in inflation.

He said: “People on low incomes face challenging times. Inflation is up by the highest rate in five years, continuing a sharp rise since the Brexit vote, and employment figures out tomorrow are likely to show that wages are barely keeping up. With increases of 2% in food, nearly 5% in energy and 3% in clothing and footwear, families are facing very difficult choices."

Kunmar added that the benefit freeze would hit family budgets further as the costs of essentials rises.

Labour's shadow chancellor, John McDonnell, echoed this sentitment but made no mention of Brexit in his comments.

He said: “Today’s further rise in inflation is deeply worrying, and once again shows how the Tories’ seven years of failed economic policy means working people are losing out, with wages lagging behind prices since the Tories came to power.
“Young people in particular, are suffering from a widening pay gap between the under and over-24s - increased by age distinctions in the Tories’ so-called National Living Wage."

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