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Inflation Decreases

Posted: 25th March 2014 17:03
The rate of inflation faced by households fell to 1.7% in the year to February 2014. The Consumer Prices Index (CPI) – the headline measure of inflation – grew by 1.7% in the year ending February 2014, down from 1.9% in January. Putting the CPI figure into context, a basket of shopping that cost £100.00 in February 2013 would have cost £101.70 in February 2014.

CPIH, the measure which includes owner occupiers’ housing costs, grew by 1.6%, down from 1.8% in January. RPIJ, the improved variant of the Retail Prices Index (RPI) calculated using formulae that meet international standards, grew by 2.0%, down from 2.1%.

The slowdown in inflation came primarily from the price movements of motor fuels. Petrol prices fell by 0.8 pence per litre between January and February this year compared with a rise of 4.0 pence per litre between the same two months a year ago. Similarly diesel prices fell by 0.8 pence per litre this year compared with a rise of 3.7 pence per litre a year ago.
Other smaller downward effects came from gas and electricity, clothing and air transport. In each case, prices rose between January and February 2014 but by less than between the same two months a year ago.

The most notable, partially offsetting, upward effects came from the furniture & household goods and recreation & culture sectors. With the former, furniture prices rose as usual between January and February but by more than a year ago. With the latter, the upward contribution came from data processing equipment and books.

It is also worthwhile thinking about the sectors that contribute to the actual rate of inflation (i.e what makes up the 1.7%) in addition to the sectors that contribute to changes in the rate (i.e what made inflation change from 1.9% to 1.7%). For most recent months, prices in the housing, water, electricity, gas & other fuels sector have been the largest contributor to the inflation rate and currently account for a quarter of inflation. On the other hand, motor fuels are currently having a downward pull on inflation with prices down by 5.1% in the year to February. Average petrol prices were around £1.29 per litre in February 2014 compared with just over £1.36 per litre a year earlier.

Source: Office for National Statistics

http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/february-2014/consumer-price-inflation-summary--february-2014.html