British consumer price index (CPI) 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 Middle East conflict.
CPI rose 2.8% year-on-year in April, data from the Office for National Statistics (ONS) showed on Wednesday. The print was weaker than the 3% forecast and slowed from the 3.3% rise seen in March.
CPI grew 0.7% month-on-month, also missing estimates of 0.9%.
Excluding energy, food, alcohol, and tobacco, core CPI rose 2.5% in April, slowing from the 3.1% increase in March. CPI services—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 base for comparison. CPI inflation had surged in April 2025 due to a host of price increases 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.
Factory-gate inflation largely reflected the impact of the Iran war on prices. Producer price index (PPI) inflation surged to 4.0% in April, much higher than the expected 2.8% and accelerating from 3.0% in the prior month.
PPI input costs surged 7.7% in April. Crude oil and refined petroleum products were the biggest contributors, with import prices also rising sharply.
Capital Economics analysts said they expect CPI to stay around 3% until July and climb to about 4.0% in early 2027, prompting the BoE to potentially hike interest rates.
