UK inflation rate increases to 3.4 per cent

CPI annual inflation – the Government’s target measure – was 3.4 per cent in March, up from 3.0 per cent in February, according to the Office for National Statistics (ONS).

The upward pressures to the change in CPI annual inflation are widespread, the largest coming from housing and household services where prices rose slightly between February and March this year but fell a year ago. The 1.0 per cent fall between February and March 2009 was the largest monthly fall on record for this series. The main effect came from domestic gas where average bills were unchanged between February and March this year but fell between the same two months a year ago.

Other large upward pressures came from transport (principally due to movements in petrol and diesel pump prices, and air fares), food and non-alcoholic drinks (with the largest effect coming from vegetables where the weather has affected supplies of some produce), and clothing and footwear (driven by women’s outerwear prices).

The only large downward pressure to the change in CPI annual inflation came from furniture, household equipment and maintenance where prices, overall, rose by less than a year ago.

In the year to March, RPI annual inflation was 4.4 per cent, up from 3.7 per cent in February. The main factors affecting the CPI also affected the RPI. Additionally there was significant upward pressure to the change in the RPI annual rate from housing. This was driven mainly by mortgage interest payments which rose by 0.7 per cent this year but fell by 6.3 per cent a year ago following February 2009’s half point decrease in the Bank rate. Within housing, there was also a large upward effect from house depreciation, which rose this year but fell a year ago.

RPIX inflation – the all items RPI excluding mortgage interest payments – was 4.8 per cent in March, up from 4.2 per cent in February.

As an internationally comparable measure of inflation, the CPI shows that the UK inflation rate in February was above the provisional figure for the European Union. The UK rate was 3.0 per cent whereas the EU’s as a whole was 1.4 per cent.