UK inflation reignites: utilities, car tax and calendar quirk are to blame

We've broken down the contributors to inflation to show how household bills and higher auto taxes were to blame. There was also the effect of the late Easter holiday weekend this year (April 18-21); this is viewed as having boosted demand for air travel (and hence airfares) as well as leisure activities more broadly.

As our first chart shows, housing, water, electricity, gas & other fuel bills contributed nearly 1 percentage point to April's headline inflation rate. Regulated price increases for these utilities took effect at the start of the new fiscal year.

Other key contributors included restaurants & hotels, transport, and recreation & culture; this explains persistently high services inflation (5.46%) that has lingered even as goods prices continue to ease.

The second chart provides a clearer breakdown of April’s inflation surge, highlighting the categories affected by our three main themes. (Chancellor Rachel Reeves' hike to Vehicle Excise Duty is included in the "vehicle operation" category in our charts.) The only notable category to see deflation was clothing, likely reflecting discounts as retailers cleared stock.

Among the G7 economies in our third chart, the UK now has the second-highest inflation rate, trailing only Japan — the only country that is actually tightening monetary policy.

The next Bank of England rate decision is scheduled for June 19. The central bank's own market-based projections anticipate that inflation could stay above 3% for the rest of this year, as our final chart shows.

Click here to check out inflation dynamics across other major economies.

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