Inflation: Fuel Prices Blamed For June Rise

Inflation surged to a 14-month high in June as rising prices at the fuel pumps and less discounting by fashion retailers intensified pressure on households.

The Consumer Prices Index (CPI) inflation rose to 2.9% last month, from 2.7% in May, the Office for National Statistics (ONS) said.

It is the highest level since April 2012, although inflation was prevented from climbing higher by falls in the prices of fruit, vegetables, bread, air fares and package holidays.

The ONS said: "The largest upward contributions to the change in the rate came from motor fuels and clothing and footwear.

"The largest downward contribution came from air transport."

The figure was weaker than economists' forecasts of a 3% level, and is expected to fall later in the year as commodity prices ease.

Meanwhile, the headline rate of Retail Price Index (RPI) inflation rose to 3.3% in June, up 0.2% from the May figure.

Motorists have complained of rising fuel prices this year

Unlike the US Federal Reserve, which aims to control inflation and also increase employment, the Bank of England's (BoE's) exclusive mission has been to keep inflation close to Government-set target of 2%.

However, the annual CPI rate has held stubbornly above the target since November 2009.

Economists said the figure would come as a relief to new Bank governor Mark Carney, avoiding the need for him to write a letter to Chancellor George Osborne explaining high inflation.

The ONS said clothing and footwear prices fell 1.9% month on month, much less than the 4.2% fall a year ago, as retailers started their summer sales with less generous discounts.

Pressure on motorists increased, with petrol and diesel prices both rising by 1.1p per litre, compared with price falls a year earlier.

If CPI hit 3%, BoE governor Mark Carney would have been asked to explain

The figures showed inflation continues to erode consumers' spending power and significantly outstrip wage rises, which increased by just 1.3% in the three months to April compared with a year earlier.

Price rises for personal care items such as moisturiser and deodorant, and increases in the cost of domestic heating fuel, helped drive inflation higher.

But there were falls in the cost of potatoes, fruit, bread, cereals and dairy products, defying economists' expectations of price rises.

Air fares and package holidays also fell in June, compared with sharp increases in flight costs in May.

Price falls for sofa beds, carpets and settees also helped hold back inflation.

A Treasury spokesman said inflation is down significantly from its peak of 5.2% in 2011.

He said: "At the same time, to help families with the cost of living, the Government has increased the tax-free personal allowance to £10,000.

"(It) will take 2.4 million people out of income tax altogether and save a typical basic rate taxpayer almost £600, and frozen fuel duty, which has kept petrol prices 13p per litre lower than they would otherwise have been."

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