Inflation steady as fuel price drop offsets price hike of clothing and food
INFLATION held steady in March as rising price tags on food and clothing were offset by a drop in the cost of flights and fuel.
The Office for National Statistics (ONS) said the Consumer Price Index (CPI) measure of inflation stood at 2.3% last month, unchanged from February’s reading and in line with economists’ expectations.
The CPI reading for March was the joint highest level since September 2013, keeping it above the Bank of England’s 2% target for inflation.
The cost of living is expected to rise over the coming months, putting pressure on the Bank’s Monetary Policy Committee (MPC) to hike interest rates beyond 0.25%.
However, MPC members have urged caution over an imminent rise, with sterling’s plunge since the EU referendum result vote squeezing consumers as companies pass down their soaring costs.
Sterling slipped back after the CPI announcement, before regaining composure in afternoon trading to rise 0.1% against the US dollar at 1.243 and push marginally higher versus the euro at 1.172.
ONS deputy national statistician Jonathan Athow said CPI paused in March as food, drink and clothing prices all climbed, while air fares fell slightly compared to last year due to the timing of Easter.
The biggest price rise came from food and non-alcoholic drinks, which reached its highest level for three years at 1.2% for the 12 months to March.
Food alone climbed 0.6% between February and March, with pricier margarine and crisps pushing costs higher.
Clothing and footwear price tags were also on the rise, climbing by 2% over the period in contrast to a 1% jump last year.
The downward pressure on the cost of living came from air fares, which fell by 3.9% between February and March after lifting by 22.9% in 2016.
The move was driven by the timing of Easter, with Easter Sunday falling on March 27 last year and on April 16 this year. The cost of flying becomes more expensive around the Easter holiday period.
Fuel pump prices were also dragging on CPI. Petrol dropped by 1p to 119.2p per litre between February and March and diesel fell by 1.1p to 122.1p per litre over the period.
Nina Skero, managing economist at the Centre for Economics and Business Research (Cebr), said households will increasingly feel the pinch as wage growth struggles to keep up with inflation.
“Today’s release confirms our expectations that 2017 will see the end of the consumer spending boom which has driven economic growth in recent years.
“With the prices of essentials such as housing costs, food and transport on the rise, less money will be left over for discretionary spending.
“This is especially true given that wage growth is unlikely to keep up with the elevated inflation levels.”
Separate figures for the Producer Price Index (PPI) showed factory gate prices, the amount UK manufacturers charge for products, eased back to a 3.6% rise in March from 3.7% in February.
Input prices, the amount British manufacturers pay for materials and fuel, recorded lower growth last month but remained at high levels, rising 17.9% annually in March.
The Consumer Price Index including owner occupiers’ housing costs (CPIH) also hit 2.3% in March, the same rate as February’s reading.
CPIH is the ONS’s preferred measure of inflation, which includes costs associated with living in, maintaining and owning a home.
The Retail Price Index (RPI), a separate measure of inflation which includes council tax and mortgage interest payments, fell to 3.1% in March, down from 3.2% in February.
A spokesman for the Treasury said: “We are building an economy that works for everyone and helping families with the cost of living by cutting income taxes for 31 million people, freezing fuel duty