Inflation remains static...

The Office for National Statistics (ONS) reported that the Consumer Prices Index (CPI) remained at 2.8% in March; however, this is the highest level it has reached since May 2012.

They stated that whilst car insurance premiums, digital cameras, DVDs, and books, saw an increase in price in the month, these were offset by lower petrol and diesel fuel costs. Here petrol prices only rose by 2.2p a litre, whereas last year saw an increase of 3.3p a litre. Likewise, diesel prices rose by 1.9p a litre against a rise of 2.6p a year earlier.

Other factors were a slower increase in the price of furniture and a fall of 0.5% in the price of tobacco and alcoholic drinks.

Their report did, however, add that they saw a reduction in producer prices, with factory gate inflation rising by only 2%, which is the lowest level since July last year. This was mainly due to the largest annual fall in crude oil prices over that same period.

Meanwhile, the Bank of England stated that they believed UK inflation will go higher than 3% before the end of this year, due to a global increase in food prices and an anticipated increase in the domestic cost of gas and electricity.

They added that their forecasts saw inflation remaining above the officially targeted 2% until at least 2016.

It has now been above this level since 2009. With the CPI sitting at 2.8%, consumers’ spending power continues to be diminished, as the growth in average earnings is only 1.3%, which continues to dampen consumer demand.

Looking forward, there is hope that inflationary pressures will ease, as Brent Crude oil dipped below $100 a barrel this month. This is reflected in a reduction of about 2.5p in the price of a litre of unleaded petrol and supermarkets have reignited a price war at the pumps to try to attract motorists to their stores.


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