UK inflation falls sharply in February
The Consumer Prices Index eased to 3pc from a 14-month high of 3.5pc in January, according to the Office for National Statistics (ONS). Prices for items such as petrol and household goods saw smaller increases than 12 months earlier, while British Gas also cut gas prices. The ONS added that toys and games also dampened inflation this year as prices were unchanged compared with a big increase in costs a year ago.
But factors such as the VAT cut – and subsequent return to 17.5pc in January – have introduced volatility into the monthly figures, as well as the desperate measures undertaken by firms to survive the worst of the recession last year.
Far less discounting by retailers this year than 12 months ago, when most shops were slashing prices to tempt in consumers, put upward pressure on the cost of living in January, alongside the rise in VAT.
Howard Archer, economist at IHS Global Insight, said: "The lower inflation is, the better for government spending plans."However, he cautioned that it was also "probably a sign that underlying demand remains pretty weak".
Meanwhile, prices across the board rose at a far lower rate between January and February than during the same period last year, when CPI inflation surged at a record monthly rate of 0.9pc.
Petrol prices rose by a record 3.2p per litre a year ago to stand at 89.5p, although this time round average prices rose by a far smaller 0.9p. Food and drink costs also rose by less than a year ago.
The only major upward impact on inflation this month came from women's clothing, where prices rose by more than a year ago.
Today's fall in CPI is slightly bigger than the drop to 3.1pc expected by the City.
The Bank of England expects inflation to continue to fall to below its 2pc target in the months ahead, as the economic slack opened up by the recession drags down prices.
Posted at 10:56PM Mar 23, 2010 by Kelly Board in The Economy | Comments[0]
