Inflation is at its lowest in a year

UK inflation falls to 2.5%, its lowest level for a year

Inflation drops to 2.5% but households still 'squeezed'

Consumer prices rose 2.5% from a year earlier, down from 2.7% in February, the Office for National Statistics said on Wednesday.

"The fact that inflation has fallen further means that real wages are likely to have strengthened more than expected, relieving some of the pressure on consumers", noted Paul Hollingsworth, senior United Kingdom economist at Capital Economics research group.

Average wages excluding bonuses were up by 2.8% in the three months to the end of February, growing at a faster rate than CPI inflation for the first time in a year.

However, if the traditional measure of inflation, the consumer price index (CPI) is used, then inflation is running above wages at 2.9% vs 2.8%. Earnings grew 2.8 per cent while inflation dropped to 2.7 per cent.

Inflation jumped in Britain after June 2016's vote to leave the European Union hammered the value of the pound and pushed up the cost of imports.

The return of real-income growth will be good news for hard-pressed households after more than a year of wages lagging behind prices.

Matt Hughes, senior ONS statistician, said: "The labour market continues to be strong and, for the first time in nearly a year, earnings have grown slightly after inflation has been taken into account".

Food prices rose 0.3% compared with a month earlier, versus a 0.6% rise over the same period in 2017, with fruit and fish applying the most downward pressure, having fallen 1.4% and 1.3% respectively.

Wages have overtaken inflation for the first time in a year, according to the latest figures. These factors may explain, partially at least, whilst wage growth is not stronger since a smaller pool of potential employees should mean that employers have to offer better terms and conditions to attract the staff that they need. And the big news is inflation is at 2.5 per cent, the lowest in a year.

However, Mr Thiru said spending was unlikely to increase with "consumers expected to remain under pressure from uncomfortably high debt levels, particularly if interest rates rise further".

Confirmation of the transition deal gives policymakers at the Bank of England some room to focus on bringing interest rates up to more normal levels, after slashing them a decade ago during the global financial crisis.

He said the recent rally in the pound has been a relief for Irish exporters, but whether that relief will be short-lived remains to be seen.

So a fall in "inflation" means the "Brexit effect" could finally be waning.

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