UK retail price inflation in April was at its highest rate since October 2015, the ONS said on Wednesday, with food prices rising by an annual 2.7% while clothing prices were up by 0.5% in the year to March.
Within the food component, fresh fruit rose by 8.8% while fresh vegetables were up 5.9%. For food items excluding fruit and vegetables, there was a 2.9% rise in food prices, including the cost of smoking and coffee. Eggs rose by 8.5% on the year and five types of vegetable (including lettuce, parsnips and broccoli) were up by 4.2%.
The retail prices index in April was 2.7%, up from a downwardly revised 2.6% in March.
The broader consumer prices index (CPI) was 2.6% in April, and food prices accounted for the largest share of the index (+1.5%). After soaring in early 2016, food prices started falling last summer, falling by 0.9% in the year to February, but since then have risen by 3.3%.
Food prices increased 0.4% on the month in April, a slowdown from 0.8% in March. Within the food category, fresh fruit was up 1.5% on the month, but fresh vegetables were up 0.8%. It was the first time in three months that fresh fruit was up on the month.
The lowest monthly change in food prices was from meat products, the Office for National Statistics said. Beef and veg were up 0.1% on the month, and chicken was up 1.4%.
Hafiz Pasha, senior economic adviser to the EY ITEM Club, said the latest figures made it more likely that core inflation would remain on the higher side of the Bank of England’s 2% target for much of this year.
“Inflation will not last for very long if oil prices and sterling continue to fall,” he said. “However, in the event of a temporary political risk risk event, or a sustained weakening in the labour market, we will not rule out a surge higher in inflation at some point in the latter half of the year.”
Commodity prices will be monitored closely in the near future with the European Central Bank poised to start tapering the €1.2tn (£1.1tn) asset-purchase programme it has been running in the eurozone for more than a year.
However, the Brexit negotiations are expected to dominate central bankers’ minds. “Uncertainty over how the Brexit negotiations are going to pan out will undoubtedly act as a drag on global trade and some central bankers will be increasingly open to the idea of cutting interest rates as their wiggle room is exhausted,” said Josh O’Byrne, head of client and market risk research at the deal specialists Bridge Financial Solutions.
