- UK CPI-based inflation rate soared to 2.1% in May 2021
- Sharp increase clearly portrayed the sudden spike in demand
- Clothing, meals and drinks, motor fuel contributed majorly to the upsurge
The Consumer Prices Index (CPI) based inflation rate in the United Kingdom soared to over 2% in May 2021 following the considerable price rise of clothing, recreational goods and motor fuel.
According to the data released by the Office for National Statistics (ONS), the CPI inflation in the UK jumped to 2.1% in the 12 months to May 2021, exceeding the market expectations of 1.8%. This has been the highest CPI inflation rate reading since July 2019. Earlier in April 2021, an inflation rate of 1.5% was recorded. On a month-on-month (MoM) basis, the CPI based inflation rate in the UK grew by 0.6%
The sharp increase in the inflation rate has clearly portrayed the sudden spike in demand from the consumers as the UK continued to reopen on a broader scale according to the planned easements set in place by the Downing Street administration.
Meanwhile, the Consumer Prices Index including owner occupiers’ housing costs (CPIH) in the 12 months to May 2021 surged to 2.1% with the transport sector providing the largest upward contribution. Other than the transport, the increasing prices of clothing, meals and drinks, motor fuel, and recreational goods, mainly the recording media and games, emerged as the major contributors to the UK inflation rate.
However, the sharp jump in the prices of aforementioned heads was partially offset by the downward contribution provided by the food and non-alcoholic drinks. Notably, the prices of food and non-alcoholic beverages dropped in May 2021, but the market prices of these products increased considerably in the period a year earlier due after the stern lockdown restrictions lifted the demand.
Between April and May 2021, the price of transport jumped by 0.3% as compared to 1% drop in the prices between the same period in 2020. Within the transportation sector, the prices of maintenance and repair of vehicles increased sharply in May 2021, alongside the membership fees for roadside recovery services as both the service heads encountered sharp reduction in the prices in May 2020.
As far as the motor fuels are concerned, the price of petrol jumped by 1.7 pence per litre in May 2021. Earlier last year in the same month, the price of petrol tumbled to a four-year low due to shortened demand for fuel as the government only allowed essential service vehicles to operate.
A largely similar jump was seen in the diesel prices as a litre of diesel became 1.5 pence costlier in May 2021.
Following the worldwide unforeseen drop in the demand for motor fuel, as well as the air turbine fuel (ATF), the WTI crude prices went into the negative territory for the first time in history in April 2020. In the UK, the petrol price fell by 2.8 pence per litre in May 2020 to a four-year low price of 106.2 pence per litre.
With the country-wide reopening of various sectors in the UK, the number of CPIH items that are required to deduce the comprehensive value of index fell to 27 in May 2020, the ONS said. The unavailable items accounted for 3.1% of the CPIH basket by weight. As a result of massive restart of hospitality and other commercial settings, the ONS collected a weighted total of 77.7% of the comparable coverage collected before the first lockdown.