Rising costs drive UK inflation rate to double in April

Over the course of the pandemic, house prices have seen their sharpest rise in 5 years as a result of the Treasury’s stamp duty extended holiday, promoting a surge in home purchasing, particularly during April. 

The Office of National Statistics have recently reported that the Consumer Price Index rose by 1.6% during the 12 months leading up to April 2021. However, in one month alone between March and April 2021, the CPIH increased by 0.7%

Halifax have added that the average house price is now £20,000 higher than pre-lockdown levels and even though stamp duty relief is to be phased out over the coming months, property prices will likely remain higher for a while yet. 

It is not secret that the UK is still struggling to keep up with the housing shortage and as raw material prices soar, the cost of building and refurbishment will only mirror this increase to homeowners. This shortage adds to the overall average increase in home prices and highlights the growing need for affordable housing. 

Market analyst James Harte from the broker Tickmill also highlights a large part of the recent inflation can be attributed to the UK housing market as well as other areas such as transport, clothing and various other household services. This data, originally provided by the Office of National Statistics goes on to identify a rising Consumer Price Index by 1.5% over the last 12 months. 

Experts are also predicting that regardless of the stamp duty holiday, the UK may likely see more inflation to come in the next month or so. Chief economist Robert Gardner from Nationwide said, ‘our research suggests that while the stamp duty holiday is impacting the timing of housing transactions, for most people it is not the key motivating factor prompting them to move in the first place’.

However, as the vaccine continues to roll out effectively within the UK, both business and consumer confidence continue to grow, fuelling the economic recovery. 

With April signifying one of the first major moves away from lockdown measures, consumers are making a return to highstreets and hospitality which should influence a surge in spending moving forward. As both of these sectors are a huge driving force behind the UK economy, overall inflation is still likely to remain high moving further into 2021. 

Overall, while inflation typically signifies rising prices within the economy, it also suggest an aggregated demand in certain areas. Housing is one such area that will continue to require considerable care and attention.