Food, drink and fuel keep inflation high

Figures from the Consumer Price Index released yesterday showed inflation for last month stayed at 4.5 per cent, the highest level since October 2008 according to the Office for National Statistics. The figures reflected big rises in the price of food and alcohol, which were only offset by a sharp fall in air fares.

A whole range of foodstuffs was hit by sharp price rises, meat being up by 5.1 per cent over the past year, fish by 11.4 per cent, bread and cereals up by 5.8 per cent, mineral waters, juices and soft drinks by 10.3 per cent and chocolate, confectionery and jams by 7.5 per cent.

Alcohol, tobacco and the cost of eating out and staying in a hotel rose at a record pace while petrol prices at the pump were also at record levels.

Economists said that the picture was likely to get worse on inflation before its got better.

Jonathan Loynes, an economist at Capital Economics, said he expected further rises in food prices and rises in gas and electricity bills “to take the headline inflation rate above five per cent, and perhaps even above 5.5 per cent by late summer”.

However, he added that inflation will fall back sharply next year as the impact of January’s rise in VAT to 20 per cent falls away.