Inflation hit by rising air fares

INCREASED transport costs and rises in the price of clothing had the unexpected effect of increasing inflation during July, latest figures show.

Analysts predicting a further fall in the rate of inflation were left with egg on their faces as the Consumer Prices Index rose 0.2% to stand at 2.6%. It is the first rise in four months.

The Office for National Statistics said rising air fares were the main contributory factor to the rise in transport costs. Air fare prices, overall, rose by 21.7% on the month. The figures would have been higher but for lower fuel prices.

The figures will be a blow to the Bank of England which was hoping the rate would continue its steady fall back towards the Government’s 2% target.

It also underlines concern about the fragile state of the economy and will do little to comfort those hoping for a route out of recession.

ONS figures also show the Retail Prices Index (RPI) standing at 3.2% in July, up from 2.8% in June. The largest upward pressures on the change in the RPI rate came from the purchase of cars, air fares, clothing & footwear and housing. The only significant downward pressure came from household goods.