British consumer price inflation held steady at a record-low zero percent in March, boosting households' disposable income before the upcoming May election. The Office for National Statistics said consumer prices rose 0.2 percent between February and March, however compared with a year earlier prices were unchanged, in line with economists' forecasts. This leaves inflation well below the BoE's 2 percent target and the headline measure calculated to one decimal point is expected to dip below zero.
The figures are likely to be welcomed by most Britons in the run-up to May 7's closely-fought national election, after years of prices outstripping meagre growth in wages. The opposition Labour Party has focused heavily on what it calls a 'cost of living crisis', saying that average households are worse off than when Prime Minister David Cameron came to power in May 2010. The Conservatives point to rapid economic growth and record employment levels.
The sharp fall in inflation has been driven by the slump in oil prices which took place last year, as well as falls in food prices. But an underlying measure of inflation Core CPI, which strips out increases in energy, food, alcohol and tobacco, fell to its lowest level in nearly nine years at 1.0 percent in March compared with 1.2 percent in February.
The prospect of falling prices is unlikely to draw a policy response from the Bank of England, however. BoE Governor Mark Carney told legislators last month that cutting rates purely in response to falling oil prices would be "extremely foolish", and most economists polled by Reuters expect the next BoE move to be a rate rise early next year.
Sales at U.S. retailers rose less than forecast in March after being depressed by harsh winter weather, signalling consumers are intent on not overextending themselves. Purchases increased 0.9 percent, the first gain in four months after a 0.5 percent drop in February; however fell short of the 1.1 percent consensus.
The figures show Americans remain focused on using the savings at the gas pump to shore up finances even as employment and confidence firm, and interest rates remain low. A boost in wage growth may be what’s needed to drive households to loosen their purse strings and sustain a pickup in growth after a first-quarter slowdown caused mainly by unusually harsh winter weather. Even though the March increase was smaller than projected, it was the biggest advance in a year.
Another report showed the producer price index rose 0.2 percent in March, matching the median forecast of economists surveyed, after a 0.5 percent drop the prior month. Over the past 12 months, wholesale costs fell 0.8 percent. The PPI excluding food and fuel (Core PPI) also climbed 0.2 percent from a month earlier.
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