Rise in cost of clothing and footwear also contributes to 1.5% figure, says ONS
A surge in oil prices and a rise in household gas and electricity bills pushed UK inflation to 1.5% in April, its highest level since the start of the coronavirus pandemic in March 2020, according to official figures.
An increase in the cost of clothing and footwear also played a part in the jump from 0.7% in the previous month as the government eased restrictions and more retailers opened on the high street.
The rate of inflation remains below the Bank of England target of 2% and most price increases relate to a turnaround from falls last year rather than more recent price pressures, but the latest figures will fuel concerns that the cost of living is on a rising trend.
Crude oil prices have tripled over the past year after dropping to almost $20 (£14.08) a barrel last April. Some of this rise has passed through to the pumps, the Office for National Statistics said, taking the average price of petrol in April to 125.5p a litre, up 1.8p on the previous month.
The ONS said the lifting of the price cap on gas and electricity prices had also increased household utility bills.
In February, the energy regulator Ofgem published the cap levels to run from 1 April 2021 to 30 September 2021 price cap, saying an increased demand for wholesale gas had sent the average bill up by £96, or 9%, to £1,138 since October 2020.
The Bank of England governor, Andrew Bailey, said on Tuesday that the central bank was sticking by its forecast that inflation would remain only slightly above target over the next year – as the economy recovered – before falling back in 2022.
Some analysts have voiced fears that inflation will escalate as consumers spend an estimated £150bn of savings accumulated over the last 14 months. They are concerned central bank policymakers will respond by increasing interest rates to limit the spending spree with the effect that more firms will go bust and unemployment will grow.
However, the Bank of England has argued that spending is likely to be more modest, putting less pressure on prices.
Hannah Audino, an economist at the consultancy PwC, said a rise in inflation above the BoE target was unlikely to trigger an increase in interest rates.
“If inflation does creep up beyond the 2% target, we expect the Bank of England to prioritise supporting the recovery over reducing inflation,” she said.
Ambrose Crofton, a global market strategist at JP Morgan Asset Management, said: “The successful vaccine rollout has paved the way for the reopening of the economy, and now consumers are eager to make up for lost time.”
He added that Covid-19 and Brexit were causing bottlenecks in supply shipments to the UK that would add to shortages and increase prices over the coming months.
“The manufacturing side of the economy is experiencing acute disruptions. A confluence of factors including Brexit-related trade frictions, rising commodity and freight prices are adding cost-push pressure.
“It is expected that these factors should prove transitory but exactly how long it is before bottlenecks are resolved remains highly uncertain,” he said.
The ONS said the cost of raw materials had increased in April by 9% from April last year compared to a 6% annual rise in March, though it was unclear whether firms would absorb the extra cost or pass it on to consumers.
Crofton added: “Surging demand and supply bottlenecks were always going to lead to a jump in prices. The big question is how persistent these forces prove to be and judging by economists’ forecasts, the jury is still out.”
In 2011, inflation increased to 5.2%, largely on the back of a dramatic rise in oil prices that followed the 2008 financial crash before falling back over the next four years to zero in 2015.
The ONS’s preferred measure of inflation, which includes housing costs, nudged slightly ahead of the standard CPI measure to 1.6%.
Source: The Guardian