UK Inflation At 30-Year High

UK consumer price inflation accelerated more than expected to hit a 30-year high in March, squeezing households’ spending power, official data revealed on Wednesday.

Consumer price inflation advanced to 7.0 percent from 6.2 percent in February, the Office for National Statistics said. The rate was forecast to climb to 6.7 percent.

This was the highest annual inflation in the National Statistics series, which began in January 1997, and was also the highest rate in the historic modeled series since March 1992, when it stood at 7.1 percent.

Core inflation that excludes energy, food, alcoholic beverages and tobacco, rose to 5.7 percent in March from 5.2 percent in February. This was also well above economists’ forecast of 5.4 percent.

On a monthly basis, consumer prices gained 1.1 percent in March, following a 0.8 percent rise in February. Prices were expected to climb 0.7 percent.

The different categories of goods and services namely, housing and household services, transport, food and drink and furniture and household equipment contributed to the annual increase in March.

The above target inflation undoubtedly makes life difficult for the Bank of England, but policymakers are increasingly shifting focus to the deteriorating growth backdrop, James Smith, an ING economist, said.

After one or perhaps two more front-loaded rate hikes, the committee is expected to press pause on its tightening cycle through the second half of the year, Smith added.

Separately, the ONS said factory gate inflation reached its highest level since 2008, led by higher metal and crude oil prices.

Output price inflation climbed to 11.9 percent in March, the strongest gain since September 2008, from 10.2 percent in February.

Month-on-month, output prices gained 2.0 percent, faster than the 0.9 percent increase in the previous month and economists’ forecast of 1.2 percent. This was the highest monthly rate since May 2008.

At the same time, input price inflation rose to 19.2 percent from 15.1 percent in February. The ONS said this was the largest percentage point increase to the annual rate and the highest the annual rate has been since records began in January 1997.

The monthly rate of input inflation was 5.2 percent in March, up from 1.8 percent in February. This was the biggest since records began in February 1996.

In February, house price inflation advanced to 10.9 percent from 10.2 percent in January, another report from the ONS showed.

The average house price was GBP 277,000 in February, which was GBP 27,000 higher than the same month last year.

London continued to be the region with the lowest annual growth, at 8.1 percent, in February.

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