| Consumer inflation hits 2.5% |
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| Tuesday, 18 March 2008 | |
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CPI annual inflation was 2.5 per cent in February, up from 2.2 per cent in January.
The largest upward pressure came from housing and household services due to gas and electricity bills rising by more than a year ago. Changes Part of the effect from these items comes from a change in the way prices are recorded. Previously gas and electricity price changes were phased in over a four month period since the tariff rate did not change for customers until the day the meter was read. Tariff increases are now implemented at the time the change is made. This means that the price rises announced over recent months are included in the February index whereas previously only a part of these would have been included. There were also small upward effects from alcoholic beverages and tobacco, with cigarette prices rising by more than a year ago, and recreation and culture, with an upward contribution from recording media such as pre-recorded DVDs partly offset by downward contributions from games, toys and hobbies, and cultural services. Food and beverages The largest downward contribution came from food and non-alcoholic beverages, particularly fruit and vegetables. Fruit prices fell compared with a rise a year ago, with the largest individual contribution coming from strawberries. Vegetable prices rose by less than a year ago. A small partially offsetting upward effect came from milk, cheese and eggs. Small downward contributions came from miscellaneous goods and services, transport and communications. Prices of miscellaneous goods and services rose by less than a year ago principally due to personal care appliances and products such as small electrical appliances and paper products. The price of passenger air and sea fares rose by less than a year ago partially offset by an upward effect from fuels and lubricants. Landline telephone charges fell this year but were unchanged a year ago. Retail Price Index (RPI) inflation was 4.1 per cent in February, unchanged from January. The main factors affecting the CPI also affected the RPI. Additionally, there was a large downward contribution from housing. The effect came mainly from mortgage interest payments where there was a smaller increase than last year but there was also a large downward effect from house depreciation. RPIX inflation – the all items RPI excluding mortgage interest payments – was 3.7 per cent in February, up from 3.4 per cent in January. As an internationally comparable measure of inflation, the CPI shows that the UK inflation rate in February, at 2.5 per cent, was below the provisional figure for the European Union as a whole of 3.4 per cent. Derision David Kuo, head of personal finance at Fool.co.uk, pointed out that the Office for National Statistics had announced the revised contents of its shopping basket used to calculate the Retail Price Index. He added that the addition and removal of a handful of items will be little comfort to many consumers, with the Government’s estimates of inflation falling nearly 6 per cent short of those experienced by consumers. A recent Fool.co.uk survey shows that the average UK shopper believes that the pound in their pockets is shrinking 8 per cent a year. "News that official inflation is 2.5 per cent may be greeted with the derision it deserves. The difference of almost three and half times between what consumers believe inflation to be, and what the Government says just cannot be explained away by the token addition and removal of a few items from the theoretical shopping basket," Kuo claimed. Household inflation He pointed out that the inclusion of a bouquet of flowers for next day delivery, the addition of muffins and the removal of microwave ovens from the list was not going to make a jot of difference to household inflation when petrol prices were soaring, utility bills were rising and council taxes were going up. “The Government may hope that the inclusion of livery fees will make the inflation basket more stable, or that the removal of 35mm film may have a negative impact on inflation," Kuo said. He urged consumers to revisit their household budget regularly and make changes to ensure that their income comfortably exceeded outgoings. Failing to do so early could make household finances as indigestible as the peppers that have just been included in the ONS shopping basket,” Kuo concluded. Related articles
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