British annual inflation soars to 5.2%

18th October 2011, Comments 0 comments

British inflation surged to 5.2 percent in September from a year earlier on soaring energy prices, hitting a three-year high, official data showed on Tuesday.

The Office for National Statistics said annual Consumer Prices Index (CPI) inflation soared from a level of 4.5 percent in August.

Analysts had forecast a jump to 4.9 percent in September, according to a poll by Dow Jones Newswires.

"By far the largest upward pressure to the change in CPI annual inflation between August and September came from increases in gas and electricity charges.

"There were also large upward pressures from air transport and communication services," it added.

The office said that the latest figure was the highest since it hit 5.2 percent in September 2008, a record for CPI inflation. CPI was introduced in 2005 although Britain was hit by double digit inflation in the early 1990s.

CPI inflation meanwhile jumped by 0.6 percent in September from August on a month-on-month basis, the ONS said. That was also higher than analyst expectations of a 0.4-percent increase.

The 5.2-percent annual figure is far higher than the Bank of England's target rate of just 2.0 percent and also easily beats current inflation levels in other major European economies, where prices are also jumping.

German annual inflation stood at a three-year high of 2.6 percent in September.

In Britain, "September's unexpectedly sharp rise in headline CPI inflation from 4.5 percent to 5.2 percent is a bit of a nasty surprise," said Jonathan Loynes, chief European economist at Capital Economics research group.

"But the key point is that inflation is either at or close to a peak and should soon start to fall back quite sharply."

Analysts predict inflation to drop in 2012 as the weak global economy pushes down energy and food prices. Britain's annual inflation rate has also soared this year owing to an increase in value added tax on goods and services at the start of 2011.

"Inflation should start heading down at the end of the year and then dip markedly at the start of 2012 as the impact of the January 2011 VAT hike from 17.5 percent to 20 percent drops out," said Howard Archer, chief UK economist at consultants IHS Global Insight.

"Consumer price inflation could very well be down near to the Bank of England's target level of 2.0 percent by the end of 2012, and it could very well dip below this level in 2013. Much will obviously depend on oil price developments."

© 2011 AFP

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