UK consumer price inflation exceeded the central bank’s 2 percent target for the first time in nearly two years in May, data released by the Office for National Statistics revealed on Wednesday.
Consumer price inflation accelerated to 2.1 percent in May from 1.5 percent in April. This was above economists’ forecast of 1.8 percent and exceeded the Bank of England’s target for the first time since July 2019.
The central bank had forecast inflation to rise temporarily above the target and move back to the 2 percent next year.
With businesses having raised their prices by more than expected once they reopened after COVID19 lockdowns ended, CPI inflation is likely to rise to a peak of 2.9 percent later this year, Paul Dales, an economist at Capital Economics, said.
“And the further surge in costs earlier in the price pipeline has made us a bit less confident that CPI inflation will drop back below 2.0 percent next year,” the economist said.
Excluding volatile energy, food, alcoholic beverages and tobacco prices, core inflation rose to 2 percent in May from 1.3 percent in April. The rate was forecast to rise to 1.5 percent.
The monthly growth in consumer prices held steady at 0.6 percent, while it was forecast to ease to 0.3 percent. Price movements for clothing, motor fuel, and recreational and cultural goods were the main reasons for the higher monthly rate this year than a year ago.
Another report from the ONS showed that output price inflation came in at 4.6 percent versus 4.0 percent in April and economists’ forecast of 4.5 percent.
The annual growth was largely driven by the 67.0 percent surge in petroleum product prices.
At the same time, input price inflation increased to 10.7 percent from 10.0 percent in April. This was the highest rate since September 2011 and above the expected rate of 10.6 percent.
Month-on-month, output prices gained 0.5 percent, slightly faster than the 0.4 percent rise seen in April. At the same time, input price growth slowed marginally to 1.1 percent from 1.2 percent.
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