Inflation outstrips wage growth once more as rate rises to 1.8% in April

The UKís inflation rate increased for the first time in nearly 12 months in April following a sudden surge in the amount holidaymakers paid to travel during the Easter period. 
Annual inflation, as gauged by the consumer price index, increased to 1.8% from 1.6% the month before, with the recent rise in petrol prices being cited as another primary factor behind inflation being pushed up. 
The severity of the rise has surprised economists, with April representing the first time that the inflation rate has climbed in 10 months and economists previously forecasting that it would increase to a smaller 1.7%.
Cost-living crisis back?
Figures from the Office for National Statistics also indicated that the growth in wages was 1.7% in the three months to March, and just 1% between February and March, which was markedly lower than the inflation rate during the same period. 
The data will be a blow to the low and middle income households in the country, who had recently enjoyed the financial pressure on their wages ease after it was revealed by the Office for National Statistics that the growth in wages had outstripped the inflation for the first time in 6 years.
And the news will renew fears that the cost-living crisis- which has seen the actual value and spending power of workers diminish in the past 6 years due to inflation consistently outpacing the growth in wages- is not yet over, with this notion being reinforced by the fact that inflation as measured by the consumer price index does not even include the cost of housing. 
The TUC general secretary, Frances O’Grady, said: “Last month we were told the living standards crisis was over. Yet one month later real wages are falling again. Even on a measure that excludes the cost of housing, prices are rising faster than wage packets.
“It will be years before workers even recover the earnings they have lost since 2008, let alone start to feel any better off.”
However, Samuel Tombs, UK economist at Capital Economics, has dismissed the threat of the recent data, arguing that the rise in inflation was merely a ëblipí and was expected due to the typical influx of consumer spending over the Easter period. 
He pointed out that inflation rose when Easter was in March last year, and that the rise in the inflation rate this April is down to the fact that it fell during a later period this year. 
He said: “The rise in UK consumer price inflation in April should not be seen as a sign that the economic recovery is causing underlying price pressures to build.
“Instead, the increase in CPI inflation from 1.6% to 1.8% in April almost entirely reflects the impact of the later timing of Easter, which fell in April this year but in March last year.”
Consumers will have to wait anxiously over the next few months in order to see if Mr Tombs remarks are accurate, though the 1% growth in wages between February and March is far more alarming; if the rate was to continue to meander along at this pace then the recent surge in inflation would be inconsequential because the cost of living would substantially outstrip real wages. 
Interest rate rise set for 2015
The primary factor behind the increase in inflation was the more expensive transport costs as air and sea fares people paid whilst travelling around during the Easter period. Air fares rose by a substantial 18% during this time whilst sea fares increased by a monumental 22%. Petrol prices also had a big hand in the recent inflation rise, as prices remained the same as they were the previous month, where a fall was reported.  
“The outlook for inflation over the coming months is benign with CPI set to stay below the 2% target over the next year,” said Sam Hill, senior UK economist at RBC Capital Markets.
Nevertheless, the 1.8% rate still stands below the Bank of Englandís target of 2%, where it has been under for the last 4 months. The Bankí recently published a report which highlighted their belief that inflation would remain around the 2% mark over the next few years, suggesting that they are under no real pressure to raise interest rates from their historic low of 0.5% anytime soon.  
Despite the rise in inflation, the government has pointed to the sub 2% rate as clear evidence that their economic policies are beginning to have a positive effect on the earning prospects of workers across the UK. 
The Treasury said: “The latest figures show that inflation remains below the target rate and well below half of the peak in September 2011. Lower inflation and rising job numbers show that the government’s long-term plan is working and Britain is coming back. The biggest risk to economic security would be abandoning the plan that is creating a brighter economic future

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