Tuesday, April 17, 2012

UK inflation pushed to 3.5% by food and clothing price rises

Bread-for-sale-in-a-super-008 A jump in the price of food and clothing compared to a year ago pushed up inflation to 3.5% in March, according to official figures.

The rise was expected by City analysts who said it was likely to prove a blip in a long-term decline over the rest of the year to nearer the Bank of England target of 2%.

But the rise will put pressure on the government, which needs inflation to fall to ease growing pressures on household budgets.

While inflation had been falling steadily since September, it remains higher than rises in average earnings and is blamed for undermining consumer confidence.

In another blow to the government, the Bank's interest rate setting committee is likely to view the figures as a good reason to hold back on a further round of printing electronic money, known as quantitative easing.

The Office for National Statistics said lower gas and electricity bills combined with a slower rise in petrol prices largely offset higher price tags for clothing and food to push up the consumer prices index from 3.4% in February.

Retail price inflation, which is often used as a benchmark for wage deals, inched lower to 3.6%, 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.

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% in February, taking the annual rate to 0.3%. The average price of a home stood at £224,473.

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% higher on average than a year ago.

The Guardian

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