UK inflation has increased for the first time in eight months in March due to a rise in the cost of food and clothing.
The Office for National Statistics (ONS) reports that the consumer prices index (CPI) measure of inflation has risen to 3.5 per cent from 3.4 per cent in February. Food and drink costs rose by 4.6 per cent, compared to March 2011 when stores used discounting to encourage sales.
Most analysts expected to see the rate of inflation stay the same, so the small increase is disappointing and takes inflation slightly further away from the Bank of England’s target of two percent.
Howard Archer, Chief UK & European Economist at IHS Global said: "Disappointingly but not unexpectedly, the downward trend in consumer price inflation from last September’s peak of 5.2% ground to at least a temporary halt in March as higher food and clothing prices took a toll.
"Inflation had been brought down markedly in January and February by the impact of the VAT hike from 17.5% to 20.0% at the start of 2011 dropping out, but this process was likely completed by March."
The retail prices index (RPI) measure of inflation, which includes the cost of mortgage interest payments and rent, fell from 3.7 per cent to 3.6 per cent.
The main influence on the slight increase in inflation was the higher cost of food and clothing. In particular, bread, meat, vegetables fruit and cereals increased in price.
There was a fall in the price of gas and electricity as the major utility supplier price reductions took effect.
The changes in inflation this month are based in part on what was happening a year ago when rising food, oil and commodity prices were contributing to a sharp rise in inflation.
Analysts will be looking carefully at oil prices over the next few months, the main threat to inflation continuing its overall downward trend. Inflation has fallen by a third in the last eight months from itrs peak of 5.2 per cent in September 2011.
Mr Archer added: "Inflation still seems likely to eventually trend down appreciably further, there is a very real danger that it will prove sticky over the next few months as high oil prices impact."
Alex Lawson, senior broker at Moneycorp, commented:"In February, annual inflation dropped to its lowest rate since November 2010, prompting a spate of predictions that its downward trajectory would continue.
"Those predictions are now looking optimistic. Today's increase in annual CPI, the first since last September, will not have been welcome news at the Bank of England."
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