Tuesday, 17 April 2012

Food, clothing prices drive up UK inflation in March



British inflation ticked up in March, driven by higher food and clothing prices and reinforcing expectations the Bank of England will not inject more stimulus
into the economy next month.
The Bank of England and the government have been hoping that falling price pressures will ease the squeeze on Britons' budgets and boost consumer spending.
Customers shop for groceries in a supermarket in London
The Office for National Statistics said that consumer price inflationrose to 3.5 percent in March from 3.4 percent in February, calling a halt to a five-month run of declines from a peak of 5.2 percent in September 2011.
The figures will heighten the concerns of BoE policymakers such as chief economist Spencer Dale and external member Martin Weale, who have expressed a worry that inflation might not fall as much as hoped, and indicated a reluctance to sanction another round of quantitative easing when the current 325 billion pound programme is complete in May.
The BoE's quarterly forecasts in February showed it expected inflation to fall below its 2 percent target towards the end of this year.
The ONS said the biggest upward drivers of inflation last month were food and clothing prices. Food prices fell less on the month in March than they did a year ago, driving up the annual rate to 4.6 percent, which was the highest since October 2011.
Annual clothing inflation, meanwhile, picked up a whole percentage point to 3.2 percent, also its highest since last October.
More worryingly for the BoE, core consumer price inflation - which strips out the volatile food, energy, tobacco and alcohol components - ticked up a notch to 2.5 percent.
Retail price inflation, which is often used as a benchmark for pay deals, inched lower, however, to 3.6 percent, its lowest since December 2009.
Figures from the British Retail Consortium earlier this month had shown that food prices posted their biggest increase since August 2010. A drought across most of England risks pushing up fresh food prices even further, while petrol prices remain near a record high.
Tuesday's data come after figures at the end of last week showed factory gate inflation was higher than expected in March, though firms' raw material costs rose at their weakest pace in more than two years.
Separate figures published by the ONS showed UK house prices rose 0.2 percent in February, taking the annual rate to 0.3 percent. The average price of a home stood at 224,473 pounds.
The ONS said the annual increase was driven by rises in London and the South East. Prices for first-time home buyers were 1.3 percent higher on average than a year ago.

©Reuters

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