U.K. Inflation Slows

The U.K.’s inflation rate dropped more than economists forecast in February as lower costs of items from toys to energy sapped price pressures in the economy.
TradingEconomics.com, Bloomberg 3/23/2010 11:54:16 AM

Consumer prices rose 3 percent from a year earlier, after increasing 3.5 percent in January, the Office for National Statistics said in London. On the month, prices increased 0.4 percent.

The inflation rate fell because of large downward effects on prices from toys, games and books, and gas bills, the statistics office said. Out of 12 categories of prices, eight showed declines from a year earlier.

Centrica Plc’s British Gas unit on Feb. 4 cut standard natural-gas prices by an average of 7 percent, the third such price reduction in 12 months. The price cut benefits 8 million households in Britain, reducing an average gas bill by 55 pounds ($83) a year.

Core inflation, which excludes costs of energy, food, alcohol and tobacco, slowed to 2.9 percent in February, from 3.1 percent in January, the statistics office said. Economists had forecast 3.1 percent, according to the median of 12 predictions in a Bloomberg News survey.

Inflation still remains at the upper limit of 3 percent set by the government. Consumers’ expectations on price increases in the next 12 months rose to the highest since November 2008, a quarterly Bank of England survey showed on March 11.

The central bank kept its 200 billion-pound bond purchase program on hold for a second month in March as officials assessed whether the recovery is strong enough to last. Some officials argued that inflation risks have increased.

Retail price inflation, a cost of living measure used in wage negotiations, was 3.7 percent in February, the same as in January, the statistics office said. Excluding mortgage interest payments, the rate was at 4.2 percent, compared with 4.6 percent the previous month.

U.K. Inflation Slows