Data published by the ONS today shows that the rate of inflation in February fell to 2.7% from 3.0% in January
“Data published by the ONS today shows that the rate of inflation in February fell to 2.7% from 3.0% in January. This marks 13 months since the rate of annual inflation crept above the 2% target of the Bank of England. In month-on-month terms, the index of consumer prices grew by 0.4%, which is a relatively subdued increase considering the traditional impact of the January sales.
“The falling prices of IT equipment may encourage companies to increase investment in technology, while the strong rise in furnishing, clothing and footwear prices will be difficult to bear for households already experiencing a squeeze on their real income.
“Fuel prices were broadly flat in February compared to a month earlier – suggesting that the main effect of the recent spike in crude prices has now passed. Likewise, the effects of Sterling‘s depreciation are now diminishing. Our estimates suggest the delayed impact of the Sterling depreciation in mid-2016 contributed 0.3% to the annual rate of inflation in February 2017.
“There are signs that domestic pressures are taking centre stage in driving inflation, as the UK economy runs out of spare capacity. This may be translating into demands for higher pay from employees, to compensate for the squeeze in real income households have been enduring for nearly a year, and may help support consumer spending over the course of 2018.”
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