Rising energy bills push CPI inflation to 5.2 per cent

14 October 2008 / by Rachael Stiles
Consumer Price Index annual inflation rose to 5.2 per cent in September, up from 4.7 per cent in August, amid continuing hikes in the price of gas and electricity, the Office of National Statistics has found.

Households have been hit this year by one energy price hike after another, with electricity inflation going up 30.3 per cent compared to last year, up from 18.0 per cent in August, while gas inflation was up to 49.9 per cent, up from 27.7 per cent in August.

The big six energy providers have all raised their rates at least once this year, putting additional pressure on household budgets, already stretched by the soaring cost of living, with higher fuel bills. The average consumer has seen the cost of gas and electricity rise by £380 this year.

Recent research from Confused.com found that consumers could save an average £490 a year if they were to switch energy provider, but 14 million households have failed to take the initiative and switch.

Clothing, recreation and cultural activities have also been pushing up inflation, as have the cost of air and sea travel, which fell in price by less than they did the year before.

Food inflation, however, has slowed for the first time since March, down to 12.7 per cent in the year to September, with the largest effect coming from the price of one essential – milk, which did not rise much over the course of the year, but rose by four pence a pint a year ago.

The Retail Price Index inflation also rose in September, up to 5.0 per cent from 4.8 per cent in August. Affected by many of the same things as CPI inflation, RPI was pushed up by fuel costs, rising to 39.6 per cent from 24.6 per cent the year before – the highest increase since the series began in 1948.

Inflation has dominated the Bank of England's decision not to cut interest rates in recent months, as it soared to twice the two per cent target set by the Government, but this has been exceeded by fear for the health of the wider economy and efforts to ward off a major recession.

Interest rates were cut by half a percentage point to 4.5 per cent this month, as the Bank put inflation concerns on the backburner while it concentrates on restoring market confidence and easing lending conditions for banks and borrowers.

While the Bank predicts that inflation will remain at current levels well into 2009, it believes that reduced economic activity, rising unemployment, and continued difficulty in gaining access to credit will curb spending and ease inflationary pressures.

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