Higher Petrol Prices Push Cost of Living Higher in March

The increased cost of fuel, clothes, and transport has pushed UK inflation up from 0.4% in February, to 0.7% in March.

The Office for National Statistics (ONS) figures were slightly lower than those forecasted by economists, with price rises being offset by lower food prices.

The ONS said that the increase in fuel prices in March was the biggest annual increase measured since January last year.

Higher oil and energy prices are tipped to push the rate of inflation up even further over the course of the year.

The Bank of England said inflation could reach 1.9% before the end of the year, whilst other experts say it could top 2%.

Jonathan Athow, ONS deputy national statistician, said: "The rate of inflation increased with petrol prices rising and clothes recovering from the falls seen in February.

"However, food prices fell back on the year, as prices of some staples were lower than at the start of the pandemic."

Samuel Tombs, chief UK economist at Pantheon, believes the Consumer Prices Index (CPI) could exceed 2% as early as May.

"Looking ahead, CPI inflation looks set to jump to about 1.7% in April, driven primarily by a large semi-annual increase in electricity and natural gas prices, as well as the anniversary of the collapse in oil prices at the start of the pandemic," said Tombs.

"April's data also will be collected after shops reopened and hospitality businesses resumed outdoor service, so the inflation rates for clothing and food service activities probably will both rise."

Quilter Investors’ Paul Craig, said that inflation has now reached a turning point as the UK economy opens back up after lockdown.

"Price growth is now on an upward trajectory, and should remain so for some time to come," warned Craig. "From here, inflation may tick markedly higher if the steady drip of consumer spending morphs into a waterfall as lockdown restrictions are lifted and households spend some of their accumulated pandemic savings."

Financial analyst at AJ Bell, Laith Khalaf, said: "The big question is whether the economic recovery, combined with fiscal and monetary stimulus, will start to foster a more sustained, inflationary trend that has the potential to get out of hand.

"This risk isn't likely to come home to roost anytime soon, with unemployment expected to rise later this year, thereby acting as a drag on rising wages."