The four things driving jump in inflation
Published 20/03/2013 | 04:20
The pressure on Chancellor George Osborne to scrap a planned increase in fuel duty has been ratcheted up after the UK inflation rate headed higher again last month.
The rate of increase in the price of consumer goods, as measured by the consumer price index CPI), edged up to a nine-month high of 2.8% in February, mostly on the back of a surge in petrol prices of around 4p a litre.
Higher oil prices and a weaker pound were said to be behind the ramp up in the cost of fuel which added to increases in air fares, utility bills and, oddly, video games, and are likely to help make up the Chancellor's mind in regards to the fuel duty increase on the eve of today's budget announcement.
Mr Osborne (below) scrapped a 3p-a-litre fuel duty increase due in January in December's Autumn Statement, but he was due to implement the rise in September of this year.
Scrapping that increase might not be easy for the Chancellor as it would cost around £700m a year in lost revenue, something he'd have to recoup elsewhere but piling more pressure on beleaguered consumers might not be an option.
"Retailers are crying out for the Government to stick to its pledge of doing everything it can to ease the cost of living in this week's Budget," Graeme MacLaughlin, relationship director, Barclays NI said. "The high street pumps more than £300bn into the British economy every year so while scrapping the planned fuel duty rise in itself won't change the status quo it will prevent life from getting any tougher."
Economist Angela McGowan from Danske Bank agreed.
"For policy makers, persistently high inflation is a real headache as it hampers the economic recovery by placing downward pressure on household incomes and hence domestic demand within the economy falters," she said, adding that public sector workers are likely to be particularly vulnerable.
"With the Treasury this week expected to announce a further squeeze on public sector salaries, Northern Ireland's economy (where the public sector accounts for one in three jobs) will undoubtedly feel the pinch from rising prices and falling wages."
Analysts have warned February's increase was likely to be the first leg of a run up, taking the Bank of England's official inflation benchmark as high as 3.5% by the summer.
Separate factory gate price data also underlined the pressure building on the UK's manufacturers after a surprise 3.2% rise in input costs in February. The weakness of sterling is fuelling higher import costs while crude oil prices also jumped 7.1% over the month.