UK inflation falls to 2.8% in April

(Sharecast News) - The UK inflation rate eased in April, official data showed on Wednesday, despite the war in the Middle East.

According to Office for National Statistics, the consumer prices index rose 2.8% in the 12 months to April, down from 3.3% in March and below consensus for 3%. The fall was driven by lower electricity and gas prices, following a reduction in the regulator's cap on charges on 1 April.

There were also smaller rises in water and sewage bills, and in vehicle excise duty, while food price inflation fell to 3% from 3.7% in the 12 months to April.

That was only partially offset by a rise in petrol and diesel prices, and in clothing and footwear prices, which rose 0.7%, all but reversing March's 0.8% decline.

However, economists still expect inflation to push higher in the coming months, after the US-Iran war sent global energy prices soaring. Data also released by the ONS on Wednesday showed that the cost of raw materials spiked 7.7% in the year to April, up from a revised 5.3% in March and well ahead of forecasts for 5.9%. Factory gate prices were also higher, rising 4%, also notably higher than consensus for 2.8%.

Core inflation, which strips out more volatile energy, food, alcohol and tobacco prices, rose by 2.5%, down on March's 3.1% rise, while CPI including owner occupiers' housing costs slowed to 3% from 3.4%.

Alpesh Paleja, deputy chief economist at the Confederation of British Industry, said: "The data does not yet fully capture the inflationary impact of developments in the Middle East. While fuel prices rose again through much of the month, higher energy costs have yet to feed through more broadly into energy-intensive parts of the inflation basket, particularly food and household utility bills. As a result, inflation is likely to rise again in the months ahead, peaking around the turn of the year.

"That said, the backdrop this time is very different from the last inflation shock. Economic growth is lukewarm, and the labour market is loosening, which should help to contain knock-on effects on wages and domestic prices."