Inflation static as transport costs rise but food and clothing fall

The rising cost of diesel and petrol contributed to inflationary pressure
The rising cost of diesel and petrol contributed to inflationary pressure

Inflation was unchanged last month after a rise in the cost of hotel bills and transport was offset by falling clothes and food prices, according to official figures.

The Office for National Statistics (ONS) said Consumer Price Index (CPI) inflation was 0.3% in May, the same rate as April when it fell for the first time since last September.

Transport costs climbed 0.9% last month, as the price of diesel stepped up 3p per litre this year compared to 1.5p in 2015. Rising sea fares also had an upward impact, picking up slightly in 2016 after falling a year ago.

The cost of restaurants and hotel bookings were also on the rise, climbing 0.5% in May compared with 0.2% in the same month a year ago. The price of an overnight stay in a hotel rose more in May than it did last year.

But these rising prices were pegged back overall, as shoppers saw food and non-alcoholic beverages drop 0.4% between April and May, with the cost of vegetable and confectionery edging down.

Clothing and footwear price tags were also easing back, down 0.2% between April and May, with a small impact coming from the falling cost of children’s clothes.

The price of petrol rose by 2.8p per litre between April and May to 108.7p a litre.

Howard Archer, chief European and UK economist for IHS Economics, said the rising oil price also put upward pressure on inflation.

“There was a modest upward impact on inflation in May from higher petrol prices as a result of oil prices reaching 2016 highs during the month.

“However, the upward impact of this was limited by the fact that oil prices also firmed in May 2015.”

Economists were expecting CPI to bounce back last month, but remain below the 15-month high of 0.5% seen in March.

The ONS said that the Retail Prices Index (RPI) - a separate measure of inflation, which includes housing costs - rose to 1.4% in May from 1.3% in April.

David Kern, chief economist of British Chamber of Commerce, said the Bank of England will be in no hurry to raise interest rates with inflation still sitting well below the Government’s target.