British consumer price index inflation grew less than expected in April, while producer inflation surged to a three-year high on rising fuel and input costs stemming from the war in the Middle East.
CPI grew 2.8% year-on-year in April, data from the Office of National Statistics (ONS) showed on Wednesday. The print was weaker than expectations of 3% and slowed from the 3.3% print seen in March.
CPI grew 0.7% month-on-month, also missing estimates of 0.9%.
Excluding energy, food, alcohol, and tobacco, core CPI grew 2.5% in April, slowing from the 3.1% rise seen in March. CPI services– which is closely watched by the Bank of England as an indicator of long-term inflation– fell to 3.2% in April from 4.5% in March.
The softer CPI print was driven chiefly by a high year-on-year basis for comparison. CPI inflation had surged in April 2025 due to a host of price increases, which were not present in April 2026.
"The drop in CPI inflation... feels like the lull before the storm and tells us very little about the persistence of the surge in inflation to come," Capital Economics analysts said in a note.
Factory-gate inflation largely reflected the impact of the Iran war on prices, which is likely to factor into CPI over the coming months.
Producer price index inflation surged to 4.0% in April, ONS data showed, much more than expectations for a 2.8% print, while also accelerating from the 3.0% seen in the prior month.
The increase in producer costs was largely due to higher input prices, part of which stemmed from supply disruptions caused by the war in the Middle East.
PPI input costs surged 7.7% in April. Crude oil and refined petroleum products were the biggest contributors to the PPI increase, ONS data showed, with import prices also rising sharply in April.
Producer inflation usually heralds an increase in CPI inflation, given that higher production costs tend to be eventually passed down to consumers.
Capital Economics analysts said they expect CPI to stay around 3% until July.
"Combined with the boost from businesses passing on some of their energy costs in the prices of non-energy items, we expect inflation to climb to about 4.0% in early 2027," Capital Economics analysts said.
They noted that the longer energy prices stay high, the more likely the BoE is to hike interest rates.
Recent signs of resilience in the UK economy, as seen with stronger-than-expected gross domestic product data for the first quarter, could also give the BoE more headroom to raise interest rates, although the central bank is widely expected to stand pat in the near-term.
