Source: TheGuardian
Britain’s inflation rate has held at its record low of zero, giving disposable incomes a boost and leaving the country on the brink of a period of falling prices.
The Office for National Statistics said inflation, as measured by the consumer price index, held at zero in March, unchanged from February, which was the lowest since comparable records began in 1989. Estimates from the ONS suggest it was the lowest reading since 1960.
Statisticians said that if the change in March was calculated to two decimal places, then prices were 0.01% lower than a year before. This would be the first fall on record in consumer price inflation.
The news was welcomed by the chancellor, George Osborne, as the Conservatives seek to flag up their economic record and play down Labour talk of a “cost of living crisis”. But critics of the coalition’s economic policy were quick to argue low inflation was a sign of weakness.
Economists had forecast that the offsetting effects of rebounding petrol prices and a price cut by British Gas would keep inflation at zero in March. But predictions in the poll by Reuters ranged from negative inflation of 0.2% to inflation of 0.1%.
The ONS said the biggest downward effect on the cost of living in March came from falls in clothing and gas prices. These were offset by a rise in fuel prices, as average petrol prices rose by 3.8p in March and diesel by a similar amount against the backdrop of rebounding crude oil prices.
The official figures showed core inflation, which excludes volatile items such as food and fuels, was the lowest since July 2006, falling to 1% in March from 1.2% in February. That came on the back of rare March discounting in the clothing sector. The ONS said it was the first time that clothing and footwear prices had fallen between February and March since the consumer price index was introduced.
Economists say the UK is still likely to enter a period of falling prices soon – following in the footsteps of other countries. Eurozone inflation has been negative since December, and the US rate turned negative in January before recovering to zero in February.