U.K. Inflation Remains at 2.8%, Continues Above BOE GoalJennifer Ryan
U.K. inflation was unchanged in March, extending its run above the Bank of England’s target and maintaining a squeeze on consumers.
Consumer prices rose 2.8 percent from a year earlier, the Office for National Statistics said in London today. That matched the median forecast of 36 economists in a Bloomberg News survey. In a separate release, the ONS said factory-gate prices rose 0.3 percent in March from February and were up 2 percent from a year earlier.
U.K. consumers are under pressure from rising prices and a fiscal tightening that’s deeper than that implemented by Margaret Thatcher during her premiership. While the government has broadened the BOE’s scope to add to stimulus even as inflation remains above its 2 percent goal, a majority of the Monetary Policy Committee voted to maintain the size of the bond-purchase plan this month.
“More inflation misery is coming for consumers,” said Rob Wood, chief U.K. economist at Berenberg Bank in London. The pace of inflation will probably accelerate further in the coming months, he said. “The BOE seems unlikely to engage in more asset purchases in the next month or two.”
The pound was little changed against the dollar after the data were published. It traded at $1.5289 as of 10:17 a.m. London time, from $1.5285 yesterday.
U.K. inflation has been above the BOE’s target every month since December 2009.
The biggest upward impact on the annual rate in March came from the category of recreation and culture, particularly digital cameras and DVDs. Car insurance premiums also had an upward impact. Downward pressure came from furniture, transportation and alcohol. From the previous month, consumer prices rose 0.3 percent in March, today’s report showed.
Core inflation, which excludes alcohol, tobacco, food and energy prices, accelerated to 2.4 percent in March from 2.3 percent in February. The Retail Prices Index, used in wage negotiations and as a basis for the inflation-linked bond market, was at 3.3 percent, up from 3.2 percent in February. Prices by that measure increased 0.4 percent on the month.
London-based Marks & Spencer Group Plc, the U.K.’s largest clothing retailer, posted the fastest quarterly sales growth in almost two years on April 11 as it cut prices on apparel. Still, it said conditions are “challenging.”
The Bank of England maintained its quantitative-easing program at 375 billion pounds ($574 billion) this month and held its key interest rate at a record low of 0.5 percent. Minutes of the decision to be published tomorrow will show whether Governor Mervyn King and two colleagues extended to a third month a push to expand QE by 25 billion pounds.
Today’s inflation report also showed that RPIX, which excludes mortgage interest payments, was at an annual 3.2 percent last month.
CPIH, which includes some housing costs, held at 2.6 percent. RPIJ, a variant which addresses difficulties with some Retail Prices Index formulae, was at 2.7 percent. Both are experimental indexes.
The producer-price data showed that core output prices rose 0.1 percent in March from February and increased 1.3 percent from a year earlier. Input prices fell 0.1 percent on the month and were up 0.4 percent from the same month a year ago. The biggest downward impact on the monthly input figure was a 2.6 percent drop in crude oil prices, the most since June, according to the ONS.
In another report, the ONS said annual U.K. house-price inflation cooled in February to 1.9 percent from 2.2 percent in January. In London, prices rose an annual 5.9 percent.