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Fuel costs drive up UK inflation

by LLB Editor
21st Apr 21 10:58 am

The UK inflation rate rose to 0.7% in the 12 months to March, up from 0.4% in February, according to the ONS.

This was pushed up by the increased cost of fuel, transport and clothes.

Fuel prices in March showed their biggest annual increase since January 2020, the ONS said.

Pantheon’s chief UK economist, Samuel Tombs, believes the Consumer Prices Index (CPI) will reach the Bank of England’s 2% target rate as early as May.

“Looking ahead, CPI inflation looks set to jump to about 1.7% in April, driven primarily by a large semi-annual increase in electricity and natural gas prices, as well as the anniversary of the collapse in oil prices at the start of the pandemic,” he said.

“April’s data also will be collected after shops reopened and hospitality businesses resumed outdoor service, so the inflation rates for clothing and food service activities probably will both rise.”

And Paul Craig, at Quilter Investors, said that with the UK economy opening from lockdown, inflation had reached a turning point.

“Price growth is now on an upward trajectory, and should remain so for some time to come,” he warned. “From here, inflation may tick markedly higher if the steady drip of consumer spending morphs into a waterfall as lockdown restrictions are lifted and households spend some of their accumulated pandemic savings.”

 

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