Inflation predicted to rise to 0.4 per cent

INFLATION is expected to pick up to 0.4 per cent when official figures for June are published today, as rising petrol prices and air fares push up the cost of living.

The Consumer Price Index (CPI) measure of inflation is predicted to step up from 0.3 per cent, where it has remained for both April and May.

Economists will also be looking out for any impact from Britain’s referendum on the EU, although the data will come too early to factor in the plunge in the value of the pound following the Brexit vote.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The contribution of motor fuel prices to CPI inflation likely rose by about 0.4 percentage points in response to a 2.1 per cent month-to-month rise in pump prices.

“A rebound in air fares inflation, following its surprise fall in May, likely also boosted the headline rate by a similar amount.”

CPI was unchanged in May after transport costs climbed 0.9 per cent after the price of diesel rose by 3p per litre in May this year, compared to 1.5p over the same period in 2015. The cost of restaurants and hotels also rose, growing 0.5 per cent in May compared with 0.2 per cent the same month a year ago.

But these price rises were offset as food and drink prices edged down at the checkout, while clothing and footwear prices eased back, down 0.2 per cent between April and May.