UK inflation to edge higher if oil prices push up energy costs, experts warn
Experts said that if global oil and gas prices continue to soar then this could drive energy costs higher.
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.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Guardian
10 hours ago
- The Guardian
UK pensions: will you have to retire later or pay in more?
You are going to have to start putting some money away for your retirement, or paying in more than you do now, and you are probably going to have to wait longer to get your hands on your state pension. That was effectively the message to millions of people this week when the government announced a wide-ranging review of the UK pensions system. The independent commission it launched will grapple with a host of thorny issues and make recommendations for change. Here are five things that might happen. The state pension age (SPA) is the earliest age at which an individual can start getting the state pension. It is now 66 for men and women but is scheduled to rise to 67 between 2026 and 2028. As things stand, the SPA is then scheduled to increase to 68 between 2044 and 2046, affecting those born after April 1977. However, 'a faster increase is definitely on the cards,' says Rachel Vahey, the head of public policy at the investment platform AJ Bell. Earlier this month, the Institute for Fiscal Studies thinktank put the cat among the pigeons when it warned that the SPA may have to be upped to 69 by 2049 and 74 by 2069 if the triple lock guaranteeing how much it will be worth is kept. The state pension provides the bulk of retirement income for most pensioners, so having to wait longer for it could have a huge impact on millions of people. Since 2012, employers have had to enrol eligible workers into a workplace pension scheme where both pay money in – this regime is known as automatic enrolment. The minimum contribution is a total of 8% – usually made up of 4% from the worker's salary and 1% from the government in tax relief, plus 3% from their employer. However, most experts agree that 8% isn't enough for a decent retirement income. It is not yet clear what level the government is leaning towards as a new minimum but pension providers and others have long called for the figure to be raised to 12%. Ministers have already said there will be no change to minimum auto-enrolment contribution rates during this parliament – so any increase is a few years away. The other thing the commission will look at is possibly extending auto enrolment to younger people and those on lower incomes. It now affects everyone in work aged between 22 and the state pension age who earns more than £10,000 a year in one job and doesn't already have a suitable workplace pension. Ministers could look at including workers aged 18 to 21, and those earning less than £10,000 a year, many of whom are not saving anything for their retirement. For many people, retirement is an abstract thing that is a long way off, and in terms of their money, other things are much more of a priority, such as saving for a home deposit or making sure they have some cash in a 'rainy day' savings account. Part of the answer, according to some, is to make pensions more flexible. One idea gaining a lot of traction is the 'sidecar savings' concept. Broadly, this would involve a small chunk of your pension contributions going into an accessible emergency fund that sits alongside your pension pot. The Resolution Foundation thinktank has suggested it could take the form of an easy-access savings account capped at £1,000, where anything above the ceiling flows into your pension. Allowing you to withdraw some of your pension pot to put towards a house deposit is another idea being discussed. In a recent speech, Nikhil Rathi, the chief executive of the UK's Financial Conduct Authority, said: 'Australia, New Zealand, the US, Singapore and South Africa all permit citizens to leverage their pension savings to buy a first home. Some have suggested we consider, carefully, similar approaches in some circumstances here in the UK.' Put simply, women now approaching retirement typically have roughly half the pension savings men do, with the latest government figures revealing a 'stark' 48% gap. That is the typical difference between the private pension wealth of women and men who have retirement savings and are aged 55 to 59. It looks even worse when you see it in pounds: typically, these women have built up a pension fund of £81,000 compared with £156,000 for men. That equates to an annual income for a 60-year-old of about £6,000 for women and about £11,000 for men – a difference of £5,000 a year. The government said this week that it was 'committed to both monitoring and narrowing' the gender pensions gap. Ministers could look at reducing the £10,000-a-year earnings threshold for auto enrolment because it excludes many women who hold multiple jobs or work part-time. Most experts say that it also means tackling the gender gap on pay and making childcare more affordable. Self-employed people are effectively shut out of the workplace pension system. They are not covered by auto enrolment, and they do not have an employer contributing for them. Only about 20% of the self-employed are saving into a private pension – that means more than 3 million aren't saving anything for their retirement. Many believe the answer lies in a product that already exists: the lifetime Isa. This lets people – including the self-employed – put by money for a first home or for their retirement, and the government adds a 25% bonus to their savings, up to a maximum of £1,000 a year. If you don't use it to buy your first home, you can access the money at 60. 'The 25% government bonus acts in the same way as basic-rate tax relief, and any income can be taken tax-free. There is also the ability to access money early if needed, subject to a 25% exit charge,' says Helen Morrissey, the head of retirement analysis at the investment platform Hargreaves Lansdown. Ministers could change the rules to let people over 40 open a lifetime Isa – at the moment they can't – and make them more appealing by cutting the 25% exit charge.
BBC News
13 hours ago
- BBC News
Half of North Norfolk coastline properties are owned outright
Almost half of homes in North Norfolk are owned outright by their occupants, a higher proportion than any other council area in data from the Office for National Statistics (ONS) showed 49.8% of properties there were fully paid for, with no money owed to area, which includes the seaside towns of Cromer and Sheringham, also had the largest percentage of population aged 65 and over in ONS said areas with the greatest proportion of homes owned outright tended to be in coastal regions or away from cities. Other hotspots for homes owned outright included Rother in East Sussex (48.7%), Staffordshire Moorlands (48.3%), the Derbyshire Dales (48.2%) and East Lindsey in Lincolnshire (47.3%).The data was published as part of the latest estimate of household tenure, including accommodation that is rented or owned with a mortgage or loan. It also showed 21.2% of properties in North Norfolk were owner-occupied with an outstanding mortgage or loan, 18.1% were privately rented and 10.9% were social rented. In 2023, North Norfolk was said to have the highest level of homes either lying empty or infrequently used in England, outside the City of London. At the time, nearly 6,000 of its 55,000 homes were either second homes or long-term empty homes. Follow Norfolk news on BBC Sounds, Facebook, Instagram and X.
Scottish Sun
a day ago
- Scottish Sun
Shoppers spot new Nestle chocolate pouches on shelves of major supermarket
The perfect sharing pack is just £2 at a major supermarket CHOC A LOT Shoppers spot new Nestle chocolate pouches on shelves of major supermarket A NEW Nestle product has left chocolate-lovers overjoyed as it lands on the shelves of a major supermarket. Shoppers shared their excitement on social media as they were desperate to get their hands on the new product. 2 The Milkybar Buttons Crispy Cookie White Chocolate Sharing Bag is available at Sainsburys for £2 An eagle-eyed shopper spotted the Milkybar Buttons Crispy Cookie White Chocolate Sharing Bag at their local Sainsburys. With hundreds of comments flooding in, the sharing bag is clearly a hit among chocolate lovers. And for just £2 it's the perfect opportunity to try out the sweet treat with friends and family. The new crispy cookie flavour is described as "white chocolate pieces with crispy cocoa flavoured rice inclusions". It includes their beloved "smooth white chocolate". A description from Milkybar adds: "No wonder we are the nation's favourite white chocolate brand." Inspired by a bakery, the new flavour offers an exciting texture with the rice inclusions. For those looking to stick to the classic flavours, Sainsburys also sell the Milkybar White Chocolate Giant buttons for £2, You can even get a supersized bag for just £2.50 with Nectar. It's part of a wider range of white chocolate products sold by the brand. Foodies race to buy new Dubai chocolate Easter egg in popular supermarket - the 'filling is crazy' and it's selling FAST Shoppers can enjoy the Milkybar White Chocolate mousse for a refreshing chilled snack, or individual bars for the perfect lunchbox filler. Nestle offer a plethora of sharing pouches across their range of chocolates. For those looking for milk chocolate, the Aero Melts Milk Chocolate might be a good choice. Or for those after something a bit more exciting, Sainsburys also sell bags of Munchies. Earlier this week it was revealed that the brand would be bringing back a popular Quality Street chocolate - to the delight of fans. Shoppers spotted the Green Triangle-inspired sharing bar at Asda. It costs just £3.50 for an 84 gram bar, and features all of the delicious flavours of the iconic Green Triangle. The Green Triangle is described as having a "smooth, silky praline filling coated in a milk chocolate shell". Of course, it has a distinctive triangle shape and comes wrapped in a green foil. A Nestle spokesperson said: "Quality Street is launching a new Green Triangle-inspired sharing bar, due to hit shelves over the next few weeks. "Inspired by our iconic Green Triangle, we've created a bar filled with Hazelnut flavour filling so that fans don't have to wait until Christmas to enjoy sharing the taste of one of their favourite Quality Street sweets as a delicious treat!"
