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UK inflation rate rises to 2.9% UK inflation rate at near four-year high
(35 minutes later)
The UK inflation rate rose to 2.9% in May, up from 2.7% the previous month, official figures show. The rising cost of foreign package holidays and imported computer games helped to push the UK inflation rate up to 2.9% last month from 2.7% in April.
It is the highest rate since June 2013 and keeps inflation above the Bank of England's 2% target. The latest inflation rate is the highest since June 2013, and above the Bank of England's 2% target.
The Office for National Statistics said one of the main reasons for the rise was the cost of foreign package holidays for British tourists. The Office for National Statistics said food and clothing also went up in price slightly after falling 12 months ago.
Another factor was the price of computer games and equipment, which are usually imported. But the cost of petrol and diesel fell for the third successive month.
They are part of the recreational and cultural goods and services sector, where prices rose overall by 0.9% between April and May compared with a fall of 0.4% a year ago. Computer games are part of the recreational and cultural goods and services sector, where prices rose overall by 0.9% between April and May compared with a fall of 0.4% a year ago.
Food and clothing also went up in price slightly after falling 12 months ago, with the sugar, jam, confectionery and children's clothing markets mainly responsible. The sugar, jam, confectionery and children's clothing markets were mainly responsible for the increase in food and clothing prices.
There were also rises in the cost of furniture and household goods, and electricity, with further price increases coming into effect in May.There were also rises in the cost of furniture and household goods, and electricity, with further price increases coming into effect in May.
However, these were offset slightly by a third successive month of falls in the price of petrol and diesel and also in the cost of air and sea travel, which was influenced by Easter falling in April instead of March as in 2016. Travellers did have some good news, however, with the decrease in fuel costs coupled with a drop in the cost of air and sea travel, which was influenced by Easter falling in April instead of March as in 2016.
Pressure on households
The pick-up in inflation is likely to continue the squeeze on consumers, with prices rising faster than increases in wages.The pick-up in inflation is likely to continue the squeeze on consumers, with prices rising faster than increases in wages.
The most recent ONS data on wages found that average weekly earnings excluding bonuses increased by 2.1% in the three months to March. Figures for the three months to April will be released on Wednesday.The most recent ONS data on wages found that average weekly earnings excluding bonuses increased by 2.1% in the three months to March. Figures for the three months to April will be released on Wednesday.
On Monday, a survey by credit card firm Visa said household spending dropped for the first time in four years last month.On Monday, a survey by credit card firm Visa said household spending dropped for the first time in four years last month.
Amit Kara, head of UK macroeconomic forecasting at the National Institute of Economic and Social Research, said: "We expect inflation to rise further over the course of this year and to reach a peak in the final quarter of 2017.
"This spike in inflation will exert further downward pressure on real household disposable income, at a time when wage growth remains modest and in turn squeeze consumer spending."
Nick Dixon, investment director at life insurance and pensions firm Aegon, said: "This high rate will particularly affect the purchasing power of retirees locked into a fixed income and the growing number whose wages have failed to keep pace."
'Key business concern'
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said inflation looked set to peak at about 3.2% in the fourth quarter of the year, "as retailers continue to pass on higher import prices to consumers".
"We doubt, however, that a majority of MPC members will feel compelled to raise interest rates this year," he added.
Suren Thiru, head of economics at the British Chambers of Commerce (BCC), warned that businesses were being hit hard by the rise in inflation.
"Higher inflation is a key business concern as it squeezes margins and weakens their ability to invest, particularly during this time of heightened political uncertainty." he said.
"The BCC's quarterly economic survey confirms that businesses continue to feel the inflationary pressures, with a significant proportion of firms struggling to absorb the rising cost of raw materials and other overheads.
"If the current political uncertainty persists, this is likely to increase the downward pressure on sterling's value, pushing inflation even higher over the next year."
The ONS's new preferred measure of inflation CPIH - which includes a measure of owner occupiers' housing costs - rose to 2.7% last month, up from 2.6% in April.The ONS's new preferred measure of inflation CPIH - which includes a measure of owner occupiers' housing costs - rose to 2.7% last month, up from 2.6% in April.
The Retail Prices Index (RPI) measure of inflation increased to 3.7% in June, up from 3.5% th emonth before. The Retail Prices Index (RPI) measure of inflation increased to 3.7% in June, up from 3.5% the month before.