This article was last updated on April 16, 2022
U.K. inflation has eased in February and hit the 15-month lowest annual level since November 2010, reducing the financial burden on British households.
Lower electricity and gas bills have helped the inflation rate to fall to 3.4 percent in February, but previously thought notions seem to get failed to ease the rising fears that high oil prices may prevent it falling quickly. Economists have already put forth their warning regarding the Bank of England’s prediction about inflation rate hitting 3 percent target by early next year could be an “optimistic” estimate, as the progress may likely to be slowed down by the rising oil prices in upcoming months.
According to the Office for National Statistics (ONS), the Consumer Prices Index fell by 0.2 percent, from 3.6 per cent in January as a result of energy bill cuts being passed on to families squeezed by high prices and sluggish wage growth throughout 2011. British households have been continuously struggling with an unpleasant mix of high inflation, rising unemployment and low wage growth. Inflation keeps on overtaking annual wage growth of 1.4 percent, squeezing incomes.
Senior economic advisor to the Ernst & Young ITEM Club, Andrew Goodwin has said: “It is clear that household finances remain under severe pressure, with inflation still around two percentage points above earnings growth. This gap should close through the year and we expect wages to be growing in real terms by the end of 2012. However, this improvement could be derailed by a spike in oil prices which would maintain the pressure on household finances and threaten the growth outlook.”
ONS has also revealed that a drop in the cost of recreation and culture is also seen, driven by cheaper digital cameras, pet-related products and books, newspapers and stationery. Air fares fell by 1.6%, compared to a 2.1% rise a year ago, due to cheaper European tickets.
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