Boost to consumer spending power to help Northern Ireland recovery
NORTHERN Ireland has a steeper hill to climb towards recovery than other parts of the UK even as inflation comes down, an economist said.
The Consumer Prices Index (CPI) rate dropped to a new four-year low of 1.6%, from 1.7% in February, according to the Office for National Statistics (ONS).
It comes a day ahead of separate ONS labour market statistics which are expected to show that regular pay is rising at a rate of 1.8%, up from 1.3%.
CPI has not been lower since October 2009, when it stood at 1.5%.
Dr Esmond Birnie, chief economist at PwC in Northern Ireland, described the figures as "welcome economic data" which demonstrated the extent of the recovery.
"This series of economic good news stories is welcome, but we should not forget that Northern Ireland is recovering more slowly than the other 11 regions and we have a steeper hill to climb.
"Nonetheless, another month of falling inflation helps underpin the UK and local recovery."
He added: "The big drivers of reduced inflation in March were falling petrol and diesel costs and a slowdown in the cost of clothing and furniture relative to last year."
Danske Bank chief economist Angela McGowan said the gap between earnings growth and inflation was also starting to close, with average weekly earnings up 1.3% in the year.
"As the year progresses and productivity in the economy rises, we hope to see earnings growth outpace inflation and indeed there are expectations that the next available data on earnings will show an annual rise of 1.8% in the UK."
That fall in inflation pressure could help households raise their purchasing power, she said.
"The latest Danske Bank Consumer Confidence Index found that 21% of households plan to spend more in the year ahead and so retailers will welcome both the increase in consumer confidence and the more consumer-friendly inflation rate."
The fall in inflation is likely to herald an end to a six-year period when pay growth has been lagging behind the rise in the cost of living, effectively shrinking workers' spending power.
Chancellor George Osborne said: "These latest inflation numbers are welcome news for families.
"Lower inflation and rising job numbers show our long term plan is working, and bringing greater economic security.
"But there is still much more we need to do to build the resilient economy I spoke of at the Budget."
Earnings have not increased at a higher rate than inflation since a brief spike in March and April 2010 and have not consistently been improving since 2008.
An end to the squeeze will be seen as a watershed moment in the recovery, and likely to be seized upon by the Coalition.