Financial News

  • 27 March 2014, 12:49

Falling Fuel Costs Help Inflation Dip To 1.7%

The biggest monthly fall in petrol prices since September 2009 helped the annual rate of inflation ease to 1.7% in February - a level not seen for more than four years.

The Office for National Statistics (ONS) said the Consumer Prices Index (CPI) measure dipped for the fifth month in a row - supporting hopes that the real-terms decline in pay is coming to an end.

Wage growth has not been higher than inflation for nearly four years but last week official Budget forecasts predicted earnings would return to real-terms growth later this year.

Today's data shows private sector pay growth - which was also 1.7% in the three monthsto January - has already caught up, but public sector pay rises remain restricted due to central Government spending cuts.

CPI, which fell from 1.9% in January, has not been lower since October 2009 - when it stood at 1.5%.

The ONS said smaller price rises for household gas and electricity bills, as well as clothing and footwear, also eased inflationary pressures in February.

But there were warnings of tougher times ahead as a report warned that grocery and restaurant bills wereset to rise by the end of the year.

On the back of the official announcement on February's figure, Prime Minister David Cameron tweeted: "It's good to see inflation fallingagain.

"Our long term economic plan is helping provide stability and security for hard-working people."

But while welcoming the fall in inflation, Labour's shadow Treasury minister, Catherine McKinnell, argued the Government needed to do more to help working people.

"The squeeze continues as prices are still rising faster than wages," he said.

"Working people facing this cost-of-living crisis are on average 1,600 a year worse off since David Cameron came to office.

"Labour will freeze energy bills until 2017, make work pay by expanding free childcare for working parents and get at least 200,000 homes built a year by 2020.

"We also want to introduce a lower 10p starting rate of tax to help 24 million people on middle and lower incomes.

"By opposing all these measures and giving a 3bn tax cut to people earning over 150,000, David Cameron has shown he's out of touch and only stands up for a privileged few."

The ONS also reported that UK house price inflation continued to rise in January.

It measured annual growth of 6.8% - the biggest rise since August 2010.

Prices in London were up 13.2%.