INDEXATION ALLOWANCE AND RETAIL PRICES INDEX TABLES/RETAIL PRICES INDEX/INDEXATION ALLOWANCE TABLE
Synopsis: Annual CPI inflation rose in April for the first time since last June. However, the RPI was unmoved.
Date posted: Wednesday, May 21, 2014
Inflation on the CPI measure reversed its steady fall from the 2.9% recorded last June and rose 0.2% to 1.8% in April. The April inflation numbers from the Office for National Statistics (ONS) were marginally above market expectations. The index showed prices rose by 0.4% across the month, against 0.2% rise for the corresponding period last year. Expectations had been for a 0.3% increase.
Continuing the trend of last month, the CPI/RPI gap narrowed again, this time by 0.2%. The RPI rose 0.3% over the month, the same rate as last year, leaving the annual RPI unchanged at 2.5%. The RPI/CPI gap is now 0.7%, very much in line with the average over the last ten years of about 0.6%.
The annual CPI rise from March to April was primarily the result of one main upward pressure, although there were some less significant downside drivers too, according to the ONS:
Upside
Transport: Overall prices increased between March and April 2014, compared with a fall between the same two months a year earlier. Air and sea fares were the two largest contributors to the rise, with prices increasing by 18% for air and 22% for sea on the month respectively. This compares with a fall of 6% for air and a rise of 3% for sea fares on the month a year ago. The ONS attributes this jump to the timing of Easter. On the transport front there was also an upward contribution from petrol and diesel with overall prices falling by less than a year ago.
The total effect of rising transport costs was an increase of 0.4% in the annual CPI.
• Clothing & footwear: Prices rose between March and April in 2014, while there was very little change between the same two months a year earlier. This added 0.08% to CPI.
Downside
Food and non-alcoholic beverage: Overall prices fell by 0.5% between March and April 2014 compared with a rise of 0.7% between the same two months a year earlier. The downward contribution came from a wide range of foodstuffs, most notably vegetables, thanks to Spring 2014 being much warmer than Spring 2013 (when there were widespread frosts).
Alcohol & tobacco: Overall, prices rose at a slower rate than a year ago. The downward contribution came from most types of alcohol (with the notable exception of beer) and tobacco.
COMMENT
Core CPI, which excludes food and other volatile items, was 2.0%, its highest since last September. One month’s figures will not be enough to worry the Bank of England, but if the pattern continues, it will hasten the possibility of an interest rate rise some time before the general election on May 7.
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