Inflation rise to curb consumer spending

HOUSEHOLDS ARE facing a further jump in inflation as the Brexit-hit pound, utility price hikes and the timing of the Easter holidays drive up the cost of living.

The Consumer Price Index (CPI) measure of inflation is expected to reach 2.6% in April – the highest rate since September 2013 – when official figures are released on Tuesday. It would mean the squeeze on consumer spending continued last month following a temporary respite in February and March.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said CPI could even reach 2.7%, with upward pressure coming from the airline industry.

Airline prices are expected to have soared last month because the Easter holidays fell on April 16 this year rather than March 27 in 2016. He said: “Prices for airline travel tend to rise very sharply around the Easter holidays, which will add 0.2% to the inflation rate.”

The way the Office for National Statistics measures prices means Npower and Scottish Power’s decision to increase gas and electricity prices in March will also have an impact on April’s CPI rate.

“Government changes to vehicle excise duty in April also made it more expensive to buy a new car than before,” he added.

“Retailers will be continuing to pass on higher import prices to consumers, adding another 0.1% to the rate as sterling’s shock comes through.”