Downward pressure in other regions offset the expected rise
UK inflation rates fell unexpectedly in February as prices for clothing and used cars fell sharply, the National Bureau of Statistics (ONS) announced today.
ONS confirmed it fell 0.4% in February, down from 0.7% the previous month.
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Economists previously expected an increase in inflation due to rising fuel and energy prices. However, the expected rise was offset by downward pressures in other regions, such as used cars and clothing.
Clothing and footwear prices fell between January and February for the first time since 2007, 5.7% lower than a year ago, the largest annual decline since November 2009.
Danni Hewson, financial analyst at AJ Bell, suggested that the figures should be analyzed in the context of the pandemic.
“Looking at today’s numbers, you can be forgiven for wondering why there are such concerns about rising inflation. Lockdown 3 is a seasonal one, as you see traditionally rising prices. We’re denting the sales of clothing per piece. The costs of toys and computer games have fallen just like used cars and public transport,” Hewson said.
“But these waterfalls have to be in context. The shops are still closed, the kids are not yet back in school, and many workers continue to work from home. Usually, forecasts are expected. It is impossible to compare to what is being done. The economy is distorted, and many of the measures that ONS normally see are missing.”
Hewson also warned of the possibility of UK inflation on the horizon and looked ahead.
“Trying to quantify what happens when lockdown ends is like trying to load tea leaves. But the February figures raised some red flags and inflation pressures were evident. It suggests that it may be brewed. The creeping commodity prices are beginning to be felt by consumers. Motor fuel has increased by 0.11% and water-like housing costs have risen by 0.1% I saw it,” Hughson said.
“In addition to that strong wage growth, these numbers are likely to be low points, along with the demand and savings of those lucky enough to miss out on the worst effects of the pandemic. It is rare to doubt the Bank of England’s belief that this is inevitable in the short term. Investors and savers should prepare.”
