Inflation hits highest rate for almost four years

The Consumer Prices Index (CPI) rose to 2.9% last month, higher than the 2.7% recorded in April and well above the Bank of England’s target rate of 2%.

The Office for National Statistics (ONS) said the increase marked the highest inflation rate since 2013.

According to the ONS, inflation was also spurred by rising food, clothing and electricity prices, although these contributions were “smaller” than those in the gaming and toy categories.

However, the cost of fuel and diesel fell for the third month in a row to offset some of those cost increases for consumers.

Price rises

Computer games form part of the recreational and cultural goods and services sector, in which prices climbed 0.9% between April and May, the ONS said.

That compares with a fall of 0.4% a year ago.

The ONS added that the rising costs of groceries and fashion items were largely driven by increases in prices of sugar, jam, confectionary and children’s clothing.

Prices are currently rising faster than wages, which grew 2.1% in the three months to March according to the latest ONS data.

Brexit concerns

Retail Economics chief executive Richard Lim said: “This confirms that real earnings are well and truly shrinking.

“With underlying conditions for households set to weaken even further in the coming months, confidence will be further damaged by heightened political uncertainty and legitimate concerns over what form Brexit is likely to take.”

James Brown, head of the UK consumer and retail practice at pricing strategy consultancy Simon-Kucher & Partners, added: “Brexit has been the biggest driver of rising inflation through higher import costs feeding through following the pound depreciation last year against the euro and the dollar.

Brexit-related price increases will continue to have a significant effect on the spending habits of much of the UK population, particularly the middle earners.”