“Significant” increases in fuel costs saw inflation return to the UK following a brief spell of falling prices, official figures showed today.
The Office for National Statistics (ONS) said inflation, as measured by the consumer prices index (CPI), rose 0.1 per cent in the year to May, following a 0.1 per cent fall the previous month – the first time it has fallen below zero since 1960.
Today’s figure was in line with economists’ forecasts, and the ONS said: “The largest upward contribution to the change came from transport services, notably air fares with the timing of Easter in April a likely factor in the movement. There were also significant upward effects from food and motor fuels.”
It added: “The largest offsetting downward effect came from recreation and culture, particularly games, toys and hobbies (such as computer games) and data processing equipment.”
Howard Archer, chief UK and European economist at IHS Global Insight, said it was unlikely that deflation would rear its head again in the UK, “although it cannot be completely ruled out if oil prices take a renewed appreciable downward lurch”.
He said: “The UK’s exit from deflation after just one month in May should kill off any lingering thoughts that the Bank of England could end up cutting interest rates from the current level of 0.5 per cent.
“However, inflation of only 0.1 per cent in May hardly increases pressure on the Bank of England to raise interest rates any time soon.”