LONDON: Britain’s main inflation rate ticked up last month but stayed close to January’s two-year low, helping consumers maintain their spending power as wage growth also picked up, even though the timing of Brexit remained uncertain.
Wednesday’s official data also showed house prices rose at the weakest annual pace in 5 1/2 years in January, curtailed by the biggest drop in London prices since September 2009, just after the low point of the global financial crisis.
Consumer prices rose at an annual rate of 1.9 per cent in February after a 1.8 per cent increase in January, the Office for National Statistics said. A Reuters poll of economists had forecast an unchanged rate of inflation.
Economists said they expected inflation to rise above the Bank of England’s 2 per cent target soon, especially as many household utility bills are due to increase in April.
“Inflation picked-up for the first time since August 2018, with rising prices across a range of items, including food and alcohol,” said Suren Thiru, an economist at the British Chambers of Commerce.
“Businesses also continue to report that the cost of imported raw materials is rising. As these high input costs filter through supply chains, they could increase the upward pressure on consumer prices in the short-term,” he added.
Still, British government bond futures rose slightly after the data showed core inflation, which strips out volatile food and energy prices, edged down, leaving the overall picture of domestic price pressures in Britain muted ahead of Brexit.
Weaker inflation, combined with rising wages and the lowest unemployment rate in 44 years, has taken the edge off the uncertainty about Brexit for many households, whose spending drives Britain’s economy.
Data due on Thursday are expected to show that retail sales grew an annual 3.3 per cent last month, weaker than just before the referendum in 2016 to leave the European Union but above its average for much of the last decade.
Britain’s modest inflation is also helping the Bank of England as it holds off on raising interest rates while it waits for the outcome of Britain’s Brexit impasse.
Several policymakers at the central bank have said they want to see firm evidence domestic inflation pressure is building before they vote to raise rates.
The ONS said house prices in January rose by an annual 1.7 per cent across the United Kingdom as a whole, the smallest increase since June 2013, when Britain was still struggling to shake off the effects of the global financial crisis.
Prices in London alone fell by 1.6 per cent, marking 11 months where prices have not risen.
The ONS said prices in the capital were down 3.3 per cent from their recent peak in June 2017, compared with an almost 18 per cent peak-to-trough fall during the financial crisis.