Inflation grows 0.3% in May on high fuel costs

INFLATION rose 0.3% in May due to the high cost of fuel and clothing, figures today reveal.

The Office for National Statistics said the Consumer Prices Index (CPI) grew by 2.7% in the year to May”, up from 2.4% in April.

“The largest upward contributions to the change in the rate came from transport (notably air transport and motor fuels) and clothing. The largest downward contribution came from food,” it said.

The inflation rate has returned to the levels seen between October 2012 and March 2013 after the slowing in the rate to 2.4% in April.

CPIH, the new measure of consumer price inflation including owner occupiers’ housing costs, grew by 2.5% in the year to May, up from 2.2% in April.

The slower growth in CPIH than CPI is due principally to owner occupiers’ housing costs increasing more slowly than overall inflation for other consumer goods and services in the year to May.

Birmingham Chamber of Commerce Group said the increase was a surprise although it acknowledged that air fares had risen by a record 22%.

This follows news earlier this month that the Organisation for Economic Co-operation (OECD) had reported that food and energy inflation in the UK was among the highest in Western Europe.

Steve Brittan, president of Birmingham Chamber, said: “Further stabilisation of the inflation rate is needed for businesses to build confidence.

“Runaway prices can stifle investment plans and the 2% inflation target set by the Monetary Policy Committee may gradually be escaping us. Rising inflation, coupled with slow economic growth and high employment, is a deadly combination for business.”