Business World

Saturday 23 September 2017

UK prices shoot up to record biggest rise in 19 years

Brendan Keenan

Brendan Keenan

UK CONSUMER prices rose seven percentage points more than Irish ones in the 12 months to April, latest figures show.

Retail prices were 5.3pc higher than in April 2009 -- the biggest annual increase in 19 years. The rise from the 4.4pc inflation recorded to March was spurred by increases in the price of women's clothes and food and increased duties on alcohol and tobacco.

Data from the Central Statistics Office last week showed that prices in Ireland fell by 2.1pc in the 12 months to April.

The weakness of sterling over the past year has added to UK consumer prices, while cutting the cost of British imports to Ireland -- although this trend has reversed in recent months.

The measure used across the EU -- which excludes mortgages and some other items -- rose 3.7pc in the UK, compared with a 2.5pc drop in Ireland.

The changes have already reversed much of the loss of Irish competitiveness which followed sterling's sharp falls last year and led to huge volumes of cross-border shopping.

Average

British inflation is also well ahead of the euro-area average of 1.5pc to March. It compares with 3.4pc in March and was ahead of economists' expectations of a 3.5pc increase.

The figures obliged Bank of England governor Mervyn King to write a formal letter to the new Chancellor of the Exchequer, George Osborne, explaining why inflation was so far ahead of the 2pc target.

Mr King said the sharp rises in oil prices over the past year, the recent increase in VAT after previous cuts and the effect of a weaker sterling on import prices were to blame.

"These factors more than account for the deviation of inflation from target and the temporary effects of these factors are masking the downward pressure on inflation from the substantial margin of spare capacity," Mr King wrote.

In its inflation report last week, the bank said inflation would move higher in the short term but drop below the 2pc target within a year because of a sluggish economy.

However, Mr King stressed that the outlook was uncertain.

Irish Independent

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