'Turning point' as inflation falls to seven-month low

Andrew Cummings
March 20, 2018

United Kingdom consumer price inflation (CPI) rate falls to 2.7% in February, down from the 3% level seen in January, according to the Office for National Statistics.

Upward contributions came from food and non-alcoholic beverages prices, which rose by another 0.1% between January and February this year compared with a rise of 0.8% a year ago and a rise in the price of footwear was another contributing factor.

Manufacturers increased the prices they charged by the least since November 2016 as the cost of their raw materials - many of them imported - rose by 3.4 percent, way down from a peak annual increase of almost 20 percent in January a year ago. It is widely expected to say on Thursday that it will keep rates on hold for now, and stick with a plan to raise borrowing costs only gradually.

In England, the January data shows on average, house prices have fallen by 0.5% since December 2017. It expects wages to grow more quickly than inflation.


The Reserve Bank today said South Africa's current account deficit increased to R137.5 billion in the fourth quarter of 2017 from R99bn in the previous period.

CPIH, a measure which includes costs associated with maintaining a home - and which the ONS cites as a more useful indicator of living costs than CPI - was 2.5% in the month, in line with expectations, and down from 2.7% in the last month.

Furthermore, sterling has strengthened in recent months on signs that Britain will avoid a disorderly Brexit.

Andrew Sentance, senior economic adviser at PwC, said: "It is not a surprise to see United Kingdom inflation starting to fall back".


House price inflation in England alone was 4.6% in January.

"The UK recovery is now almost nine years old, and yet our official interest rate is exactly where it was nine years ago".

Motor fuels and food costs look set to be the main drivers behind inflation's fall, as a push from supermarkets to pass higher import prices down to consumers starts to wane.

Kevin Doran, chief investment officer at financial provider AJ Bell takes a similar view.


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