UK Inflation rises to 2.9 per cent

As inflation rises to 2.9 per cent in the UK, Tony Freeman looks at why the government’s target rate of 2 per cent is slipping even further away and the implications this has for households.

In May 2017, the UK reached a record level of inflation, this time from 2.7 per cent to 2.9 per cent. . It is the highest rate since June 2013 and keeps the rate above the government’s target of 2 per cent.

The rise of inflation in previous months has been blamed on the popularity of package holidays, and the subsequent increases in air fares.

A survey by Visa showed that consumer spending had dropped for the first time in four years with consumers starting to feel the squeeze, holding back on spending on clothes but seemingly eating out more.

The Visa figures show overall spending was 0.8% lower than in 2016, the first fall since September 2013. With inflation rising faster than income, this means that the lower wage earners are starting to feel the gap most.

One of the main reasons for the rise of inflation is the steep fall in sterling since the UK voted to leave the European Union.

Since the ruling, the Pound is now worth around 13 per cent less against the euro and the dollar, making anything we buy with our weaker currency more expensive. This looks set to continue for at least the next few months.