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UK inflation rises to 4.4% in February

UK annual inflation rose faster than predicted in February, as surging utility bills drove up living costs.

Consumer price index (CPI) annual inflation increased to 4.4% last month, up from 4% in January, with ‘housing and household services’ accounting for 0.13 percentage points of the rise, according to the Office for National Statistics (ONS).

Economists had pencilled in a figure of around 4.2%. The 4.4% figure is the highest level since October 2008.

The CPI yearly rate has been at least one percentage point over the Bank of England’s (BoE) target of 2% since the start of 2010.

Domestic heating costs (particularly gas) were the biggest contributor to average bills rising by 0.4% over the month against a 2.8% fall between January and February last year.

Meanwhile, retail prices index (RPI) inflation also rose by 0.4 percentage points to 5.5% in February, its highest level in two decades. The RPI annual rate takes into account mortgage interest payments.

Many believe the figures are sure to provide more pressure on the BoE to hike up record-low interest rates in the near future.

Rising clothing and footwear prices rose by 3.6% over the January to February period. This was a record monthly change following the January sales, the ONS said. “The upward effect came from garments, particularly women’s outerwear.”

However, the rise was partly offset by falling prices of alcohol and tobacco, which decreased by 1.1% over the month, a record monthly decline following the highest monthly increase of 4.6% between December and January.

Spirits prices dropped by 5.8% in February, with vodka and whisky falling the most.

“As an internationally comparable measure of inflation, the CPI shows that the UK inflation rate in January was above the provisional figure for the European Union. The UK rate was 4.0% whereas the EU’s as a whole was 2.8%,” the report said.

Source : Benjamin Chiou - Sharecast

22 March 2011
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