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14 June 2011
Last updated at 05:38 ET
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Michelle Harrison from TNS explains how people's shopping habits have changed
The UK Consumer Prices Index (CPI) annual rate of inflation held steady in May at 4.5%.
The Retail Prices Index (RPI) measure of inflation - which includes mortgage interest payments - was also unchanged at 5.2%, according to the Office for National Statistics (ONS).
Fuel and food prices continued to be the main contributors, with both components up 1.3% from April.
Air transport costs fell sharply in the month as Easter peak fares ended.
However, over the course of the past 12 months, alcoholic beverages and tobacco recorded a 9.8% increase - the highest year-on-year rise on record - thanks in part to the VAT rise.
Fuel prices also accelerated, up 13.7% compared with a year ago.
The overall inflation figure was in line with market expectations.
Bank resistance It follows a rise to 4.5% in April - the highest inflation rate since October 2008 - from 4% in March.
The Bank of England expects CPI inflation to rise above 5% in the next three months, well above its 2% target, and analysts are also expecting the rate to increase.
"Not only did transport inflation - airfares in particular - not fall all the way back after last month's Easter-related jump, but food price inflation also rose a bit more sharply than we had expected," said Jonathan Loynes of Capital Economics.
"Further rises in the latter, along with recently announced further energy price hikes, are likely to take the headline inflation rate above 5% perhaps, and perhaps even above 5.5%."
Last week, Scottish Power - which supplies 2.4 million UK households - said it would increase the cost of gas by 19% and the cost of electricity by 10% from 1 August.
The Bank of England has resisted calls to raise interest rates - seen as the most effective policy tool in combating inflation - on the basis that temporary, external factors, such as rising oil and food costs, are driving price rises.
It believes raising rates could undermine the UK's fragile economic recovery.
Rate move Most economists agree with the Bank that inflation will fall back sharply next year, when the effect of the VAT increase drops out of the data and household energy bills are expected to stabilise.
And the Bank will have noted that core inflation fell back to 3.3% from the record high of 3.7% set in April.
Core inflation strips out volatile food and fuel prices, and is closely watched by the Bank as a signal for longer term inflation trends.
Earlier this month the Bank held rates at a record low of 0.5% for the 27th month in a row.
The Bank is widely expected to hold off raising rates until after the summer, and perhaps even until 2012 - a view reinforced by the latest data.
However, for the previous four months, three members of the Bank's rate-setting Monetary Policy Committee have voted to increase rates.
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Please turn on JavaScript. Media requires JavaScript to play.Michelle Harrison from TNS explains how people's shopping habits have changed
The UK Consumer Prices Index (CPI) annual rate of inflation held steady in May at 4.5%.
The Retail Prices Index (RPI) measure of inflation - which includes mortgage interest payments - was also unchanged at 5.2%, according to the Office for National Statistics (ONS).
Fuel and food prices continued to be the main contributors, with both components up 1.3% from April.
Air transport costs fell sharply in the month as Easter peak fares ended.
However, over the course of the past 12 months, alcoholic beverages and tobacco recorded a 9.8% increase - the highest year-on-year rise on record - thanks in part to the VAT rise.
Fuel prices also accelerated, up 13.7% compared with a year ago.
The overall inflation figure was in line with market expectations.
Bank resistance It follows a rise to 4.5% in April - the highest inflation rate since October 2008 - from 4% in March.
The Bank of England expects CPI inflation to rise above 5% in the next three months, well above its 2% target, and analysts are also expecting the rate to increase.
"Not only did transport inflation - airfares in particular - not fall all the way back after last month's Easter-related jump, but food price inflation also rose a bit more sharply than we had expected," said Jonathan Loynes of Capital Economics.
"Further rises in the latter, along with recently announced further energy price hikes, are likely to take the headline inflation rate above 5% perhaps, and perhaps even above 5.5%."
Last week, Scottish Power - which supplies 2.4 million UK households - said it would increase the cost of gas by 19% and the cost of electricity by 10% from 1 August.
The Bank of England has resisted calls to raise interest rates - seen as the most effective policy tool in combating inflation - on the basis that temporary, external factors, such as rising oil and food costs, are driving price rises.
It believes raising rates could undermine the UK's fragile economic recovery.
Rate move Most economists agree with the Bank that inflation will fall back sharply next year, when the effect of the VAT increase drops out of the data and household energy bills are expected to stabilise.
And the Bank will have noted that core inflation fell back to 3.3% from the record high of 3.7% set in April.
Core inflation strips out volatile food and fuel prices, and is closely watched by the Bank as a signal for longer term inflation trends.
Earlier this month the Bank held rates at a record low of 0.5% for the 27th month in a row.
The Bank is widely expected to hold off raising rates until after the summer, and perhaps even until 2012 - a view reinforced by the latest data.
However, for the previous four months, three members of the Bank's rate-setting Monetary Policy Committee have voted to increase rates.
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