Transport costs lead to hike in inflation

INFLATION grew by 1.8% in the year to April 2014, up from 1.6% in March, latest figures have shown.

Data released by the Office for National Statistics showed increases in transport costs, notably air fares, sea fares and motor fuels, was the main reason for the rise.

The announcement ends the downward trend in the rate seen over the past few months and is the first rise since June last year. 

Helping to offset the increase was a fall in the price of food, said the ONS in its Consumer Prices Index update.

The timing of Easter is also said to have had an impact on the index – most notably for air fares and sea fares.

Transport prices, overall, increased between March and April 2014, compared with a fall between the same two months a year earlier. Air fares and sea fares were the two largest contributors to the rise, with prices increasing by 18% and 22% on the month respectively.

The ONS said this compared with a fall of 6% and a rise of 3% for air fares and sea fares on the month a year ago.

The timing of Easter is thought to be a factor in both cases, with the Easter weekend falling within the April collection period for these services this year, but mainly missing the March and totally missing the April price collection periods a year ago.

Petrol and diesel costs fell by less than a year ago. Petrol prices were unchanged between March and April this year compared with a fall of 2.1p per litre between the same two months a year ago. Diesel prices fell by 0.5p per litre this year compared with a larger fall of 3.9p per litre in 2013.

The only other notable upward contribution to the change in the CPI 12-month rate between March and April 2014 came from clothing & footwear where between March and April in 2014, prices rose compared to the stable picture seen in the same two months a year earlier. The upward contribution mainly came from a range of women’s clothing items and accessories, with reports of recoveries from sales and price increases across a number of retailers.

Alcohol and tobacco prices rose at a slower rate than a year ago. The downward contribution came from most types of alcohol – with the exception of beer – and tobacco.

The Retail Prices Index grew by 2.5% in the year ending April 2014, unchanged from March.

Business leaders in the West Midlands said that despite the increase, it was good news that inflation remained around its 2% target.

Tim Pile, president of the Greater Birmingham Chambers of Commerce said: “Maintaining an environment of low interest rates and low inflation helps build the stability needed for businesses in Greater Birmingham.

“In the chamber’s Quarterly Economic Survey for Q1, confidence among businesses is at its highest level since 2007. Fostering this confidence through a steady economic environment will translate into jobs and greater output.”