UK inflation to edge higher if oil prices push up energy costs, experts warn
The latest figures from the Office for National Statistics (ONS) showed the rate of UK Consumer Prices Index (CPI) was 3.4% in May – slightly higher than the 3.3% forecast by most economists.
It came in lower than the 3.5% recorded for April – however, the ONS has since said that that figure was incorrect due to an error in how it initially calculated price rises, and it should have been 3.4%.
Inflation remaining elevated was largely due to food prices rising in shops, with items like chocolate, jam and meat spiking last month.
Food and non-alcoholic drink prices rose by 4.4% in the year to May – the highest level in more than a year.
The end of Easter sales on furniture and homeware is also thought to have contributed to prices jumping across the category between and April and May.
On the other hand, air fares, petrol and diesel prices fell between April and May, helping to balance out the overall inflation rate.
Experts have said that inflation is set to remain elevated over the coming months, particularly if global oil prices continue to spike.
Laith Khalaf, head of investment analysis at AJ Bell, said: 'The escalation of conflict in the Middle East has bumped up the oil price, which will put upward pressure on inflation if sustained.'
The price of Brent crude oil has risen to a four-month high in recent days since Israel launched an attack on Iran's nuclear programme and conflict between the two countries has escalated.
It has stoked fears over possible disruption to the supply of crude in the Middle East – with Iran a significant exporter of oil, and the potential for oil and gas passing through the Strait of Hormuz to be obstructed.
Higher energy prices – which have not been factored into the latest ONS data – threaten to push up inflation in the UK.
Rob Wood, chief UK economist for Pantheon Macroeconomics, said he was expecting inflation to 'bounce around these rates for the rest of the year' and to peak at 3.6% in September when energy prices spike.
This peak could rise to as much as 3.8% if oil and natural gas prices continue to soar, he said.
Matt Swannell, chief economic advisor to the EY Item Club, said: 'Headline inflation is likely to edge upwards over the next few months, and the increase could be more pronounced if the recent rise in Brent crude oil prices is sustained.
'But we expect inflation to cool from October, as the positive contribution from the energy category wanes.'
Experts also said that the Bank of England was facing a difficult task in setting interest rates amid price volatility in global markets.
Most economists expect the Bank to keep UK rates the same, at 4.25%, when it makes the next announcement on Thursday.
Mr Wood said policymakers are likely to 'proceed cautiously' with just one more cut to rates this year, expected in November, amid 'sticky' inflation.
Elsewhere, the ONS's data showed the statisticians preferred measure of inflation, Consumer Prices Index including owner occupiers' housing (CPIH), fell to 4% in May from 4.1% in April.
Meanwhile, the Retail Prices Index (RPI) rate of inflation fell to 4.3% from 4.5%.
However, the ONS said April's RPI figure was also 0.1 percentage points too high, and should have been 4.4%.
This happened because of an error that meant the effect of vehicle tax hikes in April was overstated in the data collected for the month.
The ONS said it would not be revising the official published figures, in line with its policy which only carries out revisions in exceptional circumstances.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
4 hours ago
- Reuters
US crude, gasoline stockpiles fall, distillates build, EIA says
July 23 (Reuters) - U.S. crude oil and gasoline inventories fell last week, buoyed by stronger demand and exports, while distillate stockpiles rose, the U.S. Energy Information Administration (EIA) said on Wednesday. Crude inventories fell by 3.2 million barrels to 419 million barrels in the week ended July 18, the EIA said, double analysts' expectations in a Reuters poll for a 1.6 million-barrel draw. Crude stocks at the Cushing, Oklahoma, delivery hub (USOICC=ECI), opens new tab rose by 455,000 barrels in the week, the EIA said. U.S. crude exports were up by 337,000 barrels per day (bpd) to 3.86 million bpd, while net U.S. crude imports (USOICI=ECI), opens new tab fell last week by 740,000 barrels per day, the EIA said. Oil futures pared earlier losses following the larger-than-expected draw. Global benchmark Brent futures were trading at $68.18 a barrel, down 41 cents, by 11:06 a.m. EDT (1506 GMT), while U.S. West Texas Intermediate futures fell 43 cents to $64.88 a barrel. Refinery crude runs (USOICR=ECI), opens new tab rose by 87,000 barrels per day, and refinery utilization rates (USOIRU=ECI), opens new tab rose by 1.6 percentage points to 95.5% of total capacity, its highest level since June 2023. Utilization rates in the Gulf Coast refinery hub hit a one-year high at 96.1%. Gasoline stocks (USOILG=ECI), opens new tab fell by 1.7 million barrels last week to 231.1 million barrels, the EIA said, also nearly double expectations for a 908,000-barrel draw. Product supplied of gasoline, a proxy for demand, rose by 478,000 bpd to 8.97 million bpd. The four-week average for product supplied was at 8.81 million bpd, versus 9.27 million bpd last year. "Gasoline demand posted a bit of a positive vibe in this report," said Bob Yawger, director of energy futures at Mizuho, while cautioning that demand numbers should still be higher for this time of year. "Gasoline demand during the summer driving season has to be at 9 million bpd for the market to really succeed," he added. Distillate stockpiles (USOILD=ECI), opens new tab, which include diesel and heating oil, rose by 2.9 million barrels in the week to 109.9 million barrels, the data showed, versus forecasts for a 1.1 million-barrel drop. "The increase in the diesel supplies has eased some of the panic we've been seeing in the crack spread recently about tight supplies," said Phil Flynn, a senior analyst with Price Futures Group.
Daily Mirror
5 hours ago
- Daily Mirror
M&S handed mobile ad ban after using 'unhealthily thin' model
An advert by Marks & Spencer has been banned because of the model's appearance (Image: PA) A Marks and Spencer advert has been banned after the featured model was judged to be "unhealthily thin". The UK's advertising watchdog has ruled that it was "irresponsible" for M&S to use the image in question to promote its clothing on its mobile app. The Advertising Standards Authority criticised the ad, stating that the model, dressed in slim-fit trousers and a white top, "appeared thin and she wore large pointed shoes which emphasised the slenderness of her legs". The ASA's decision also noted that the camera angles made the model's head seem disproportionate and "highlighted her small frame". The ASA concluded: "Therefore, we considered that the pose of the model and the choice of clothing meant the ad gave the impression that the model was unhealthily thin". The company is still recovering from a damaging cyber attack (Image: PA) In response to the ban, Marks and Spencer expressed regret for any upset caused and promptly withdrew the image. A spokesperson for the company commented: "Our womenswear sizing ranges from size 8 to 24 and we always want to reflect that in our advertising." They continued: "The product images on our website feature models of varying sizes so we can appeal to all our customers, however following the ASA guidance, we have removed this particular image from our website and apologise for any offence caused." While three additional images were brought to the attention of the ASA by concerned consumers, the authority did not find these to be in violation, thus no further action against the retailer was taken. It comes as four people have been arrested by police investigating the M&S, Co-op and Harrods cyber attacks. The arrests include three teenagers - a 17-year-old British man from the West Midlands, a 19-year-old Latvian man from the West Midlands, a 19-year-old British man from London - and a 20-year-old British woman from Staffordshire. The individuals were detained on suspicion of blackmail, money laundering, offences linked to the Computer Misuse Act and participating in the activities of an organised crime group. All four people remain in custody. Paul Foster, head of the NCA's National Cyber Crime Unit, said: 'Since these attacks took place, specialist NCA cybercrime investigators have been working at pace and the investigation remains one of the agency's highest priorities. 'Today's arrests are a significant step in that investigation but our work continues, alongside partners in the UK and overseas, to ensure those responsible are identified and brought to justice.' M&S was forced to shut down its online store following the cyber attack, which happened during Easter weekend and affected contactless payments in stores, as well as click and collect orders. It was later confirmed that customer data, including names, email addresses, addresses and dates of birth - but it does not include card or payment details, was stolen. The boss of M&S last week issued an update, and said the rest of its online operations will reopen by next month. The supermarket started resuming online orders in June but some services are still not back to normal. For example, you still cannot place an order for click and collect or next day delivery. M&S is also still is not delivering to Northern Ireland. Stuart Machin, CEO of M&S, expects these services to be fully restored from August. Speaking to shareholders at the retailer's annual general meeting, he said: "Since these attacks took place, specialist NCA cybercrime investigators have been working at pace and the investigation remains one of the Agency's highest priorities.
Daily Mail
5 hours ago
- Daily Mail
UK housing crisis sparks 10% increase in young British adults living with their parents - while more than half of people living alone now are pensioners
Soaring housing costs have sparked an increase of almost 10 per cent in the number of young British adults failing to move out of their parents homes, new figures reveal today. The number of those aged 20-34 still living with mum and/or dad rose from 3.3 million in 2014 to 3.6 million last year, the Office for National Statistics said. The figures suggest fewer people are leaving home in their mid 20s, with issues like rent and mortgage costs and the uncertain job market affecting their choices. The proportion is higher among men, with a third of those in this age group still with their parents, compared to a quarter of women, with the difference most prevalent in the early and late 20s. The ONS said it was part of 'a trend of adults reaching milestones later in life' which could be explained by 'a number of factors including increased housing costs'. The data also revealed that pensioners accounted for more than half (51 per cent) of all people living alone in the UK last year, up from 45 per cent in 2014. Over 65s were the only age group where the number of people living alone actually rose, thanks to increasing life expectancy. A higher proportion of women aged 65 years or over lived alone (40.9 per cent) than men of the same age (27 per cent). Labour has pledged to deliver 1.5 million homes before the next election and has introduced major changes to the planning system. Angela Rayner has also announced plans to build 180,000 new social homes in the next decade as the Government seeks to 'turn the tide on the housing crisis'. The figure would be six times the number of social homes built in the 10 years up to 2024. It forms part of a drive to build 300,000 new social and affordable properties by 2035, backed by a £39 billion investment announced by Chancellor Rachel Reeves in last month's spending review. But housing charity Shelter has argued that the Government needs to build 90,000 new social homes a year for the next decade – five times the figure Ms Rayner has committed to. According to Shelter, building 90,000 social homes a year would clear waiting lists, which currently stand at around 1.3 million households, and end the use of temporary accommodation.
