London - UK inflation’s upward trajectory paused in March as the timing of Easter led to a drop in airfares, offsetting increases in the price of food and clothing.
While the rate was unchanged compared with February, at 2.3%, that’s still up from just 0.5% a year ago. The increase over the past year reflects higher fuel costs and the pound’s decline since the Brexit vote in June.
On the month, prices rose 0.4%, the Office for National Statistics said. Airfares fell 4%, compared with a 23% jump a year earlier, when the Easter holiday fell in March.
The inflation pickup is already squeezing workers, and the British Retail Consortium reported on Tuesday that retail sales fell the most in six years in the first quarter.
With wage growth forecast to have slowed to 2.1% in the past three months, the situation for households may worsen. The Bank of England sees inflation hitting close to 3% by the end of the year - well above its 2% target.
Inflation’s “change of direction is likely to be temporary,” said Dan Hanson, an economist at Bloomberg Intelligence in London. “The broader trend remains one of accelerating price gains thanks to the drop in sterling.”
Prices for food and drink rose an annual 1.2%, the most in three years. Core inflation, which excludes food and energy, slowed to 1.8% in March from 2%.
The ONS also reported that factory-gate price inflation was at 3.6% in March, down from 3.7% the previous month.
While the annual gain in input costs slowed, it’s still running close to 18%, with import costs up more than 17%. The cooling of the annual rate of change reflects sterling’s relative stability in recent months plus base effects.
Still, the pound is down about 16% since the vote to leave the European Union, and the ensuing jump in inflation has been the most visible Brexit economic impact so far.
The pickup is dividing BOE policy makers and prompted one, Kristin Forbes, to vote for an interest-rate increase last month. Others on the nine-member committee don’t see a need to tighten policy just yet because, in their view, there’s little sign so far of domestic price pressures.