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Business News

UK inflation unexpectedly rises to 1.8% in April

Concerns about cost of living remain as inflation rises above wage growth

Inflation rose faster than expected in April as the Easter holidays pushed up travel costs, dashing hopes that the cost of living crisis had finally come to an end.

Inflation, as measured by the Consumer Prices Index (CPI), rose to 1.8 per cent in April from 1.6 per cent in March, according to the Office for National Statistics (ONS).

The increase was predominantly driven by travel costs, including air and sea fares, due to the timing of Easter, which fell in April this year, as well as petrol prices which were flat compared to a 2.1p per litre fall over the same period last year. Food and non-alcoholic beverages fell by 0.5 per cent month-on-month offsetting the upwards pressure.

Howard Archer, chief UK economist at IHS Global Insight, said it is unlikely that April's rise "will mark the start of a significant upward trend in inflation", noting that inflation looks well placed to remain below the 2 per cent set by the Bank of England "at least until the end of 2014".

However, April's rise suggests the cost of living is still rising faster than wage growth and British families are yet to benefit from the coalition's much-heralded economic recovery. Inflation, which dents consumers' buying power, has stood above pay growth since April 2010, adding strain on households.

"We doubt that earnings growth will race ahead. Companies are still keen to contain their costs in an ongoing competitive environment while still appreciable labour market slack limits workers’ ability to push for higher pay," he added.

The TUC general secretary, Frances O'Grady, warned that, "even on a measure that excludes the cost of housing", prices are rising faster than wage packets and that it will take years for workers to "recover the earnings they lost since 2008, let alone start to feel any better off".

A separate measure of inflation, the Retail Prices Index (RPI), which includes housing costs, was unchanged at 2.5 per cent.