Inflation unchanged at 0.3% as food price falls balance out rising travel costs


Inflation remained unchanged last month as the rising cost of transport and eating out was offset by sliding clothes and food prices, according to official figures.

The Office for National Statistics (ONS) said Consumer Price Index (CPI) inflation was 0.3% in May, unchanged from April when it fell for the first time since last September.

Transport costs climbed 0.9% in May, as the price of diesel stepped up 3p per litre this year compared to 1.5p in 2015. Rising sea fares also had an upward impact, picking up slightly in 2016 after falling a year ago.

The cost of restaurants and hotel bookings were also on the rise, climbing 0.5% in May compared with 0.2% in the same month a year ago, with overnight stays in hotels rising by more than they did in 2015.

But these rises were pegged back as shoppers saw the cost of food and non-alcoholic beverages drop 0.4% between April and May, as vegetable and confectionery prices took a tumble.

Clothing and footwear price tags were also easing back, down 0.2% between April and May, with a small impact coming from the falling cost of children's clothes.

The price of petrol rose by 2.8p per litre between April and May to 108.7p a litre.

The Retail Price Index was 1.4% in May, up from 1.3% in April.

Economists were expecting CPI to bounce back last month after it took a surprise fall from a 15-month high of 0.5% in March.

Inflation is predicted to rise gradually over the year but remain well below the Government's 2% target, leaving the Bank of England in little hurry to raise interest rates, which have remained at 0.5% since March 2009.

It comes as the Bank continues to sound alarm bells over a potential British exit from the European Union, which it said could "materially" hit growth.

The Bank, which is expected to vote unanimously to keep rates on hold at 0.5% on Thursday, warned last month that Brexit could cause a "technical recession", with a sharp fall in the pound causing inflation to spike higher.

It also cut its UK growth forecasts to 2% in 2016, 2.3% in 2017 and 2.3% in 2018.

UK economic growth slowed to 0.4% in the first three months of 2016, down from 0.6% in the fourth quarter of last year, following an industrial sector slump.

And a recent flurry of gloomy reports suggest activity has pulled back sharply since then due to Brexit fears.

The FTSE 100 Index tumbled by 1.9% on Friday as investors dived into safe havens amid heightened concerns over slowing global growth and the impact of a British exit from the European Union.