The Consumer Prices Index (CPI) rate of inflation rose to 2.7% in April from 2.3% in March. It’s the highest figure recorded since September 2013, according to the Office for National Statistics (ONS).
Increased air fares were highlighted as a key driver of inflation, with the late Easter holiday pushing up prices during April. Clothing costs, vehicle excise duty (VED), and electricity prices were also cited as reasons for rising inflation.
This was partially offset by a fall in the cost of fuel between March and April 2017.
Inflation continues to be much higher than the Bank of England’s 2% inflation target.
Maike Currie, investment director for personal investing at Fidelity International, says: “The combination of rising prices and lacklustre wage growth is squeezing real incomes and making life more difficult for consumers. As the Bank of England governor Mark Carney pointed out last week, this means a more challenging time for British households over the course of the year.
“Inflation is a ‘Jekyll and Hyde’ character - while it may be good news for borrowers, as it erodes the value of their debts, it has detrimental implications for savers, investors and retirees, chipping away at the value of future interest and dividend payments and eroding the worth of their original capital.
“Once pricing pressures become entrenched, consumers’ feel the pain, businesses don’t invest and the stock market gets worried.”
Retirement income specialist, Retirement Advantage, estimates this increase in inflation will leave UK households needing to find an additional £20.2 billion to maintain their living standards.
The typical household will need an extra £742 a year to maintain the same standard of living they enjoyed in April 2016.
Andrew Tully, pensions technical director at Retirement Advantage, says: “We are all feeling the pain from rising prices and stagnant wages, but this latest inflation increase really will be a hammer blow to households across the country.
“The living standards squeeze can have a devastating impact on people living on fixed incomes, which typically includes retirees.”
The ONS also reports the rate of inflation including the cost of housing – CPIH (Consumer Prices Index including Housing). This rate of inflation was 2.6% in the year to April. This is the ONS’ preferred measure of inflation but this statistic does not currently meet international standards.
Meanwhile the rate of RPI (Retail Prices Index) stood at 3.5% in the year to April. Again, this isn’t a national statistic but it is still used for many government calculations.