Clothing and cars pull UK inflation lower

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UK inflation unexpectedly dropped in February, dragged down by lower prices for clothing, second-hand cars and games, ahead of a jump expected in the spring.

Annual consumer price inflation slowed to 0.4 per cent in February from 0.7 per cent in the previous month, data from the Office for National Statistics showed on Wednesday.

The reading was well below the 0.8 per cent forecast by economists polled by Reuters, and the decline reverses the increases in the previous two months.

“A fall in clothing prices helped to ease inflation in February, traditionally a month where we would see these prices rise,” said Jonathan Athow, ONS deputy national statistician for economic statistics, “but the impact of the pandemic has disrupted standard seasonal patterns.”

Core annual inflation, a measure that excludes volatile and seasonal prices such as energy, food and alcoholic beverages, also slowed to 0.9 per cent from 1.4 per cent in the previous month.

Inflation fell despite rising prices for motor fuel, and for housing and household services overall.

The Bank of England expects the UK inflation rate to rise closer to its target of 2 per cent later on this year because of higher energy prices and strong expected demand in constrained services, such as pubs and hairdressers, as the economy reopens.

However, in its latest monetary policy decision this month, the central bank noted that it did not intend to tighten its monetary policy at least until there is “clear evidence” of significant progress in eliminating spare capacity and reaching the inflation target “sustainably”.

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