UK Inflation Up More Than Expected

UK Inflation

The Office for National Statistics have said that consumer inflation rose more than anticipated in March, led by a knock-on effect from gas bills that remained static last month after falling a year ago.

Consumer inflation rose to 3.4% in March from 3% in February, another contributing factor resulting in the increase was higher fuel and air fare prices.

Analysts were expecting a reading of 3.2%, due to the increase in petrol prices, the ongoing effects from January’s rise in VAT and the record fall in gas prices in March last year.

The higher inflation is expected to be transitory according to economists and the central bank as the short-term effects above are gradually outweighed by weak growth and high unemployment which limit the ability of companies to raise prices and increase wages.

On the month, consumer price inflation rose 0.6%, twice as fast as analysts expected and above the 0.4% rate recorded in February.

The RPI (retail price inflation) gauge, which includes a broader range of housing costs, hit its highest level since September 2008, rising to 4.4% from 3.7%, against forecasts for a rise of 4.2%.

RPI is used to index many social security payments and some wages.

Within the consumer price inflation basket, the biggest rise came in transport, which was up a record 11.3% over the year. Communication costs rose by 4.9%, the highest annual rate since records began in January 1997.

Footwear and clothing prices fell at the slowest annual pace since July 2007, down 2.6% on the year and services overall rose at their quickest rate since May 2009.

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