UK: Misery for commuters after shock rise in inflation
HARD-hit rail commuters face a biggerr-than-expected 6.2% increase in average fares in the new year after official figures revealed a shock rise in the inflation rate today.
The retail prices index (RPI) figure for July, which is used to determine how much regulated rail fares including season and saver tickets are allowed to increase in 2013, rose to 3.2% from 2.8% the previous month, according to the Office for National Statistics. The City had expected the rate to remain flat at 2.8%.
The average fare increase for England is calculated by adding 3% to RPI, meaning a rise of 6.2%, although some tickets can go up by a further five percentage points, or more than 11%, as long as they are balanced by cuts on other fares.
The greater-than-expected rise in RPI, which was accompanied by an increase in the closely watched consumer prices index (CPI) rate to 2.6% from 2.4%, was driven by hefty increases in air fares, while there were fewer discounts from retailers who had already slashed prices in June to shift stock amid the wash-out weather.
Vicky Redwood, UK economist at Capital Economics, said: “July’s unexpected rise in UK inflation is disappointing, but it is likely to be just a temporary blip.
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“The rise in the headline rate from 2.4% to 2.6% (consensus 2.3%) was driven by an increase in the core rate (from 2.1% to 2.3%). But some rebound in core was always possible after temporary factors pulled it down in June.
“Indeed, after wet weather forced retailers to discount heavily in June, clothing inflation unsurprisingly recovered a bit in July. Airfares inflation also rose, but this is a particularly volatile component.
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“Admittedly, the near-term outlook for inflation has worsened slightly on the back of the renewed rise in petrol prices and the rise in agricultural prices. But despite these factors, inflation still looks likely to drop below its 2% target within the next two or three months, as we reach the anniversary of last year’s utility price hikes. And we still expect the weak economy to push core price pressures down further, keeping inflation very low next year.”
However, the timing of last month’s increase could not have been worse for rail travellers, with the July figure being used as the basis for fare increases in January.
The increase in average regulated ticket prices next year, which follow a similar increase for 2012, will mean that fares have risen by more than inflation for 10 years in a row.
Unions, transport campaigners and rail passenger groups staged a day of action at railway stations across the country today to protest against the “massive” increases.
Stephen Joseph, chief executive of the Campaign for Better Transport, said the increases are “untenable” because fares will rise three times faster than salaries next year, which it claimed will damage the economic recovery.
And unions said tens of thousands of rail commuters will have to pay more than �5,000 a year for their season tickets after the new rises come into effect.
Meanwhile, today’s rise in the rate of CPI brings to an end three months of falls, intensifying the squeeze on struggling families.
The ONS said air fares, which are highly seasonal, rose 21.7% between June and July,- the largest increase since 2004.
Travel companies have recently reported an increase in demand for foreign holidays as people look to escape the wet start to the British summer, while there have been anecdotal reports of people leaving London to escape the Olympics.
And July saw the record smallest monthly fall in prices in footwear and clothing prices after retailers brought forward their summer sales to June.
A Treasury spokesman said: “Inflation has halved since its peak in September but any increase is disappointing.
“The Government knows how tough things are for families at the moment and that is why we have reduced income tax, and frozen both council tax and fuel duty.”