UK inflation steady at record-low zero per cent in March

14 Apr5:07 PM

[LONDON] British consumer price inflation held steady at a record-low zero per cent in March, official figures showed on Tuesday, boosting households' disposable income before May 7's election.

The Office for National Statistics said consumer prices rose 0.2 per cent between February and March but compared with a year earlier, prices were unchanged, in line with economists' forecasts.

The ONS added that if the price change was calculated to two decimal places, however, prices were 0.01 per cent lower than a year before, which would be first fall on record in consumer price inflation on that measure.

Inflation has not been this weak since at least 1989, when comparable data began. The ONS said that a rough estimate based on other figures suggested inflation was the weakest since isolated price falls in 1959 and 1960.

This leaves inflation well below the BoE's 2 per cent target and the headline measure calculated to one decimal point is expected to dip below zero. But for now few economists think Britain is at risk of the Japanese-style entrenched price falls that have threatened the eurozone.

The figures are likely to be welcomed by most Britons in the run-up to May 7's closely-fought national election, after years of prices outstripping meagre growth in wages.

The opposition Labour Party has focused heavily on what it calls a 'cost of living crisis', saying that average households are worse off than when Prime Minister David Cameron came to power in May 2010.

The Conservatives point to rapid economic growth and record employment levels.

The sharp fall in inflation has been driven by the slump in oil prices which took place last year, as well as falls in food prices.

But an underlying measure of inflation, which strips out increases in energy, food, alcohol and tobacco, fell to its lowest level in nearly nine years at 1.0 per cent in March compared with 1.2 per cent in February.

Clothing prices fell between February and March for the first time on record, possibly reflecting changes to seasonal discounting patterns, the ONS said.

Data also released by the ONS on Tuesday showed that factory gate prices sank by 1.7 per cent in annual terms, broadly in line with economists' predictions.

The prospect of falling prices is unlikely to draw a policy response from the Bank of England, however.

BoE Governor Mark Carney told legislators last month that cutting rates purely in response to falling oil prices would be "extremely foolish", and most economists polled by Reuters expect the next BoE move to be a rate rise early next year.

House prices inflation across Britain slowed to 7.2 per cent in the 12 months to February from 8.4 per cent in January, the ONS also said on Tuesday. The fastest price rises were outside London in eastern England, where prices were up 10.7 per cent.

REUTERS