Shock jump in UK inflation to 2.7pc

UK inflation jumped to a surprise five-month high of 2.7pc in October as higher university tuition fees and food costs pushed up the cost of living for British households.

• Annual CPI inflation +2.7pc in October (2.2pc in September)
• Annual RPI inflation 3.2pc (2.6pc last month)
• Highest annual rate of education inflation since records began
• Highest year-on-year rate of CPI since May

The figures from the Office for National Statistics were higher than expected. Economists had forecast that the consumer price index (CPI) would rise from a 34-month low of 2.2pc in September to between 2.3pc and 2.5pc in October.

A near trebling of university tuition fees after the Government lifted the cap to £9,000 this year was the main contributor to the rise in inflation.

Education costs overall rose 19.1pc between September and October - more than twice the size of the next biggest monthly increase for education prices since CPI records began in 1996.

Food inflation was also behind the rise in CPI after the record wet weather earlier this year left the UK with its worst potato and carrot harvest in living memory, which pushed up vegetable prices, according to the ONS.

Fruit and confectionery prices also rose. The rise in sweet prices was due to confectionery companies reducing the size of products - the ONS treats that as a price increase as consumers get less for their money.

The figures also showed that the Retail Prices Index (RPI), which includes housing costs, rose to 3.2pc in October from 2.6pc in September as mortgage rates also increased. The RPI rise between September and October was the largest monthly increase for two and a half years.

The ONS said last month's SSE 9pc increase in energy prices for customers were not taken into account for the October figures. However, planned rises in gas and electricity prices later this year are likely to push up inflation in the coming months.

Alan Clarke of ScotiaBank said: "I'm a little surprised. We knew university tuition hikes were coming but the extent to which this is reflected in the data is dramatically bigger than when we've had increases in the past.

"Where do we go from here? Onwards and upwards. Utility bill increases are on their way. We've also got the effect of the US drought and increased food prices to factor in.

"I don't think we're going to get anything like the 2pc inflation target."

Economist Samuel Tombs, of Capital Economics, said the inflation data provides an "uncomfortable backdrop" to the Bank of England's inflation report on Wednesday.

The Treasury said the figures were "disappointing", but inflation remains far lower than its peak of 5.2pc last September. However there are fears the rate could reach 3.5pc by the middle of next year.

Rising inflation will likely also fuel speculation that the Bank of England will hold off from taking further action under its economy-boosting quantitative easing programme.

Separate figures published by the ONS on Tuesday showed that factory gate inflation held steady at 2.5pc, but input cost inflation was higher than expected, showing an annual rise of 0.1pc compared to an expected 0.5pc decline.

House price data released alongside these figures showed property prices were 1.7pc up on the year in September.