Surging cost of computer games, hotel rooms and air fares drives surprise increase in rate of inflation
- Consumer Prices Index increases to 2.1 per cent in July up from two per cent
- Surprised economists had been expecting CPI to drop to 1.9 per cent
- But increases in costs of computer games and hotel rooms prompted increase
- Meanwhile, Retail Prices Index, another measure of confirmed at 2.8 per cent
- July RPI rating used to set next year’s rail season ticket prices, sparking anger
A surge in the cost of computer games, hotel rooms and air fares saw inflation increase more than expected in July as consumers were hit in the pocket.
New data published by the Office for National Statistics (ONS) showed the Consumer Prices Index (CPI) creeped up to 2.1 per cent last month, slightly above the two per cent recorded in June.
Economists had been expecting the rate to dip slightly to 1.9 per cent but consumers suffered more than had been predicted with the cost of having fun going up.
Meanwhile, rail commuters today found out they face an increase in season ticket prices next year of almost three per cent.
The cap on the annual rise in regulated fares is linked to July’s rate of Retail Prices Index (RPI) – another measure of inflation – which the ONS revealed today was 2.8 per cent, down from 2.9 per cent last month.
Rail campaign groups immediately warned that commuters will ‘refuse to pay’ if season ticket prices continue to be hiked.
The Consumer Prices Index increased to 2.1 per cent in July with costly computer games partially driving the rise
Computer game prices were up 8.4 per cent in July while hotel rooms were up 3.1 per cent
Chris Jenkins, assistant head of inflation at ONS, suggested the increase in CPI had been driven by large rises in computer game and hotel room pricing.
He said: ‘The inflation rate increased slightly, with computer games, consoles and hotel prices rising more than they did last year.
‘Conversely, air, international rail and sea fares did not rise by as much as 12 months ago.’
The largest driver of inflation in the volatile recreation and culture sector came from games, toys and hobbies, in particular from computer games and consoles where prices went up by 8.4 per cent between June and July this year.
There was a rise of 4.1 per cent between the same two months last year, according to the ONS.
The significant uptick in the the cost of computer games is often attributed to the composition of the bestseller charts at the time with big name titles often responsible for skewing pricing figures.
Meanwhile, restaurant and hotel prices also saw sizeable increases.
The cost of overnight hotel accommodation were 3.1 per cent higher in July than in June compared to a 0.5 per cent increase a year ago.
Rail season tickets to increase by 2.8 per cent next year
Rail commuters face an increase in season ticket costs next year of almost three per cent.
The cap on the annual rise in regulated fares is linked to July’s rate of Retail Prices Index (RPI) inflation, which was announced by the Office for National Statistics as 2.8 per cent.
Rail campaign groups warned that commuters will “refuse to pay” if season ticket prices continue to be hiked.
They have also called for the lower Consumer Prices Index (CPI) measure of inflation to be used to set fare increases, which are implemented from January 2 2020.
The CPI rate increased to 2.1 per cent last month, the ONS said.
The UK, Scottish and Welsh Governments regulate rises in around half of fares, including season tickets on most commuter routes, some off-peak return tickets on long-distance journeys and tickets for travel around major cities at any time.
A cap on how much they can be increased is pegged to the July RPI figure, except for off-peak fares in Scotland for which RPI-1% is used.
Rail regulator the Office of Rail and Road said regulated fares went up by an average of 2.8 per cent in January 2019, following the July 2018 RPI figure of 3.2 per cent.
The cost of clothing and footwear dropped by 2.9 per cent between June and July compared with a much larger fall of 3.7 per cent between the same two months in 2018.
Transport dragged on the CPI as international rail and sea fares rose by 2.6 per cent compared with a larger rise of 6.1 per cent last year.
However, air fares surged rocketed up by 12 per cent – still smaller than the 20.1 per cent leap recorded in July 2018.
Fuel costs were also falling, with petrol down 0.9p month-on-month to 127.3p per litre and diesel 2.3p lower to 132p per litre.
Diesel has traditionally been more expensive than petrol but the gap between the two has been narrowing, the ONS said.
The CPI including owner-occupiers’ housing costs (CPIH) – the ONS’s preferred measure of inflation – was 2% in July, up from 1.9% in June.
John McDonnell, the shadow chancellor, said: ‘Rising prices will hurt those already affected by nine years of austerity – and nine years of the Tories’ low-pay economy.
‘Real wages are still below pre-crisis levels – and the failure of the Tories to boost real wages shows why they cannot be trusted on the economy.
‘Labour will establish a real living wage of at least £10 per hour, invest in our public services to end austerity, and end the scourge of the low-pay economy.’
Pro-Remain campaigners blamed the CPI increase on Brexit uncertainty.
Best for Britain CEO Naomi Smith said: ‘These new figures show the devastating impact Brexit uncertainty is having on our economy.
‘This Government’s reckless pursuit of a No Deal Brexit will hurt those on the lowest incomes the hardest as prices sky-rocket.
‘If the Government had any sense it would rule out No Deal immediately and try to protect people’s living standards by staying in the EU.’
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