UK inflation more than doubled to a one-year high in April as the economy reopened and energy prices soared
- UK inflation rose 1.5% in April year on year, a sharp rise from a 0.7% increase in March.
- The UK economy is gradually reopening from strict lockdowns, aided by its vaccine rollout.
- Economists expect UK inflation will jump above 2% this year, but think it will remain under control.
UK inflation more than doubled in April as the economy reopened and energy and clothing prices climbed sharply, official figures showed Wednesday, rising at its fastest pace in more than a year.
Headline consumer price index inflation rose 1.5% in April year on year, following a 0.7% increase in March. Month-on-month, CPI inflation rose 0.6% in April compared to 0.3% in March, the Office for National Statistics said.
Core inflation, which excludes food and energy prices, rose 1.3% in April compared to a year earlier. That was in line with expectations and followed a 1.1% rise in March.
The UK's headline inflation figure was considerably lower than in the US, where the CPI jumped 4.2% year on year in April, causing a sharp sell-off in stocks.
But there were signs of growing prices pressures as the UK and global economies reopened from lockdowns. Gas and electricity prices rose more than 9% month on month, while a measure of input prices paid by factories rose at an annual rate of 9.9%.
However, ONS chief economist Grant Fitzner said so-called base effects were a key driver of the headline rate.
"Inflation rose in April, mainly due to prices rising this year compared with the falls seen at the start of the pandemic this time last year. This was seen most clearly in household utility bills and clothing prices."
Ruth Gregory, senior UK economist at consultancy Capital Economics, said April's rise was "almost entirely driven by energy price effects, which will only be temporary."
She added: "We doubt a sustained increase in inflation that would concern the Bank of England will happen until late in 2023."
The pound was roughly flat against the dollar at $1.419 on Wednesday, having shown little reaction to the data. The UK's FTSE 100 stock index dropped 0.76% in early trading.
Inflation has become a major focus for financial markets in recent months, with investors worried that prices could shoot up as countries reopen and cause central banks to cut back on their support for economies sooner than expected.
The Bank of England expects UK inflation to climb above the 2% level it thinks is optimal for the economy in 2021, rising close to 2.5% before the end of the year. Yet it predicts inflation will then fall to its 2% target by the middle of 2023.
Samuel Tombs, chief UK economist at consultancy Pantheon Macroeconomics, said: "CPI inflation will rise further over the coming months as prices for air travel, domestic accommodation and package holidays leap in response to rebounding consumer demand."
Yet like the Federal Reserve, the Bank of England has made no suggestion that it is planning to cut back on support for the economy sooner than expected, despite predicting a rapid rebound for UK growth in 2021.