Inflation hits four-year high

The May retail inflation rate fell even as compared to April, when it prevailed at a higher rate of 2.99 percent. The central bank is expected to raise short-term interest rates in response to steady job creation and low unemployment.

They show that regular weekly earnings for employees, excluding bonuses, increased by 1.7% over the three months, but that inflation increases resulted in real wages falling by 0.6%.

The dollar is plunging on Wednesday following the release of disappointing economic data.

And gasoline stations saw sales drop 2.4 percent, the biggest decline since February of previous year.

Still, looking at wider core services, prices rose 0.2 percent in May, stronger than the earlier two months' pace.

With inflation now at its highest rate in almost four years, the impact of past falls in sterling continue to feed through to households, according to Richard Lim, chief executive of Retail Economics: "Food inflation rose by 2.5% according to the latest data, the fastest since 2013".

Prices are rising across the board thanks to the fall in the pound seen since last summer's referendum, with food prices increasing particularly rapidly. In May a year ago it stood at just 0.3%.

The figure exceeds expectations with economists predicting 2.7 per cent from the May data, while the Bank of England previously forecasting that inflation would peak at just under 3 per cent in Q4. "This doesn't bode well for economic growth - the United Kingdom economy is heavily reliant on the consumer and falling real incomes will eventually translate into lower retail sales".

Despite the sharp rise in prices, the Bank of England is widely expected to keep interest rates at their record low of 0.25 per cent when it announces its latest monetary policy decision on Thursday.

"There is an upside risk to inflation on account of three major factors: the increase in the house rent component in CPI, the implementation of GST, and the announcement of large farm loan waivers and higher deficits of states".

On a monthly basis, consumer prices gained 0.3 percent, slightly faster than the 0.2 percent increase economists had forecast.

In terms of regions, Northern Ireland had the lowest employment rate across the period at 68.8 percent.

Auto sales fell 0.2 percent after rising 0.5 percent in April.

The figures lay bare the squeeze on household finances as inflation outstrips wages, with CPI having been sent soaring as the Brexit-hit pound has pushed up the price of imported goods and energy.

  • Zachary Reyes