UK Inflation Rate Falls Again

The UK inflation rate, as measured by the Consumer Prices Index (CPI), fell to 1.6 per cent in March, down from February’s 1.7 per cent. This is the third consecutive month the rate has fallen below the Bank of England’s target of 2 per cent and takes the rate to a four-year low.

The fall was mainly attributed to transport, particularly motor fuels, with other smaller downward effects from the clothing, furniture and household goods sectors, although these were partially offset by upward contributions from restaurants and hotels and alcohol and tobacco.

The gap between inflation and average wage growth is now at its narrowest since April 2010, according to the Office for National Statistics (ONS), which published the figures today (April 15). The last time wages consistently grew faster than inflation was in mid 2008.

Before December last year, annual inflation had exceeded the Bank’s target every month since December 2009, eroding consumers’ spending power and making falling living standards a political hot potato. However, figures out tomorrow are expected to show that average weekly earnings are finally rising faster than inflation.

Other data published by the ONS today showed that factory gate inflation was also down, to 0.5 per cent, its lowest level since October 2009, while the rate of inflation according to the Retail Prices Index (RPI) also fell to 2.5 per cent during the month, down from 2.7 per cent in February.

Meanwhile, house prices in the year to the end of February rose by 9.1 per cent, the sharpest hike since June 2010 and up considerably from the 6.8 per cent rise in January.