UK Inflation Surges to 3.5% Amid Soaring Fuel Costs
Petrol prices hit highest levels since August 2022 as energy cap set to increase and raw material costs continue upward trend.
Carla Rooney
UK inflation rose to 3.5% in the year to October.
Rob Wood confirmed this surge largely stemmed from diesel. Average diesel prices surpassed £2 a litre for the first time ever at the beginning of this month; Grant Fitzner further detailed increased fuel prices as the main driver, with diesel costs at their highest since July 2022.
The annual cost of raw materials and goods leaving factories also continued its upward trajectory. Higher crude oil and petrol prices fuelled this rise.
Global events contributed to soaring fuel costs. The Iran war squeezed global oil and gas supplies, practically closing the Strait of Hormuz to most fossil fuel traffic, sending the price of Brent crude well north of $100 a barrel.
Domestically, the government decided to begin drilling in the Jackdaw gas field in the North Sea. Meanwhile, Ofgem’s price cap on household energy bills will increase at the start of October, adding further pressure on consumers.
Other factors influencing the inflation rate included airfares, computer games, and live events, which often show volatility. These increases were partially offset by hotel stays, where prices rose less than in the previous year.
A temporary summer VAT cut on family attractions concluded in September, removing a mitigating factor for some consumer spending. However, Sanjay Raja noted food price rises have been more limited due to "fierce" competition among supermarkets, though this could change from September as the energy shock and extreme weather take effect.
Looking ahead, state pensions are widely expected to increase by 3.9% next year, based on recent wage growth figures.
Most forecasters had expected the Consumer Prices Index (CPI) rate to have risen to 3.4% in September, from 3.1% in August.