An overall rise in the Consumer Price Index (CPI) was fuelled in large part by increases in the costs of food and energy, it has been suggested.

In figures covering the 12-month period up to May 2008, the CPI rose by 3.3 per cent, up from a three per cent rise recorded in April. According to the Office for National Statistics (ONS), which compiled the data, this increase could be attributed to inflated costs of food and non-alcoholic beverages. The government agency noted that the largest rises came in the cost of meats, with bacon and processed meats seeing some of the most notable increases. Meanwhile, the cost of vegetables also shot up, compared with falls in average prices seen a year ago.

Decreases last year in the price of electricity and gas also contributed to the higher overall figure recorded for last month, while the cost of heating oil rose when compared with May 2007. The costs of other recreational goods and services was also found to have risen, with books, newspapers and magazines all costing more than they did a year ago. However, the ONS noted that this was partly offset by an overall decrease in the cost of some consumer media, particularly pre-recorded DVDs. The cost of diesel was also identified as having risen particularly sharply.

For those consumers who have been struggling to keep up with the inflated costs of living, taking out a personal loan may prove an effective way to finance essential areas of expenditure such as food and fuel costs and mortgage repayments.

The CPI is the national standard measure of price inflation and is used by analysts to assess the overall health of domestic spending throughout the UK. It forms the basis for the monetary policy committee’s (MPC’s) inflation target.

Currently, the MPC has set an inflation target of two per cent and following the increased reported by the ONS, Bank of England governor Mervyn King has sent an open letter to chancellor Alistair Darling to explain the reasons for the rise. While he noted the global increases in the price of food, fuel and energy, he insisted that the current economic situation would not continue unabated.

“There are good reasons to expect the period of above-average inflation we are experiencing now to be temporary. We are seeing a change in commodity, energy and import prices relative to the prices of other goods and services. Although this clearly raises the price level, it is not the same as continuing inflation. There is not a generalised rise in prices and wages caused by rapid growth in the amount of money spent in the economy,” he commented.

Mr King forecasted that inflation would peak at the end of the year and would then begin to recede to the two per cent target. However, he noted that each monthly rise in fuel, food and energy costs will affect the overall 12-month inflation measure. As such, he anticipated that the CPI would remain above target levels well into 2009.

Elsewhere, an independent consumer confidence index conducted earlier this year by Taylor Nelson Sofres showed that optimism about the health of the UK economy hit an all-time low during February.

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