LONDON: British inflation unexpectedly jumped to its highest level in nearly four years in May, tightening the squeeze on consumers who now face the added worry of political uncertainty after last week’s inconclusive election.
The impact of the fall in the pound since last year’s Brexit vote made itself felt as the higher costs of foreign holidays and of imported computer games and equipment helped push up consumer prices by 2.9 percent year-on-year.
That was its biggest annual increase since June 2013, the Office for National Statistics (ONS) said. It was also above the median forecast of 2.7 percent in a Reuters poll of economists. It is also faster than the growth in pay for most people who have suffered a squeeze on their incomes almost without break for a decade. Data due to be released on Wednesday is likely to show basic pay rose by an annual 2 percent in the three months to April.
Prime Minister Theresa May, weakened by the loss of her parliamentary majority in the election, has accepted that voters’ patience with austerity is at an end, the Times reported on Tuesday.
Despite the stronger-than-expected consumer price inflation (CPI) figures, the pound fell slightly after the ONS data, possibly reflecting a slowing of the surge in prices faced by factories, which hints at slower inflation ahead for households.
Paul Hollingsworth, an economist at Capital Economics, said he believed the data showed the drop in the pound has fed through into inflation more quickly than expected.
“While we think that CPI inflation will peak at a little above 3 percent before the end of this year, it is likely to drop back fairly quickly in 2018,” he said.