Britain now has Western Europe's highest rate of consumer price inflation after it fell by less than expected in March, to 10.1%, from February's 10.4%, official data has shown.
Economists polled by Reuters had forecast that the annual CPI rate would drop to 9.8% in March, moving further away from October's 41-year high of 11.1% but still eating into the spending power of workers whose pay is rising by less.
Despite falling in March, Britain's inflation rate was the highest in Western Europe and the only country in the region to post a double-digit number for last month.
Food And Drink Prices
The Office for National Statistics said the price of food and non-alcoholic drinks rose by 19.1% in annual terms in March - the biggest such rise since August 1977, according to the ONS.
Last month the Bank of England said it expected inflation to "fall significantly" in the second quarter. In February, the BoE had forecast March inflation of 9.2%.
While inflation is likely to drop naturally as the sharp increases in energy prices seen last year fall out of the annual comparison, the BoE is trying to judge how fast it will decline.
Read More: UK Retailers Report Boost In Spending In March
Wage Growth
Recent indicators have looked mixed on that front, with data on Tuesday showing stronger-than-expected wage growth. Business surveys however show cooling cost and selling price pressure.
Financial markets on Tuesday pointed to a roughly 80% chance that the BoE will raise interest rates next month.
Commenting on the data, analyst Danni Hewson of AJ Bell said, "Bread and cereal prices have reached record levels and although overall food inflation is at a wincingly high 19.1% every household will have their own unique inflation number to contend with.
“The cost of simply living has crept insidiously higher and wage increases are struggling to keep pace with such high inflation, meaning that for many people there’s a growing amount of month left at the end of money. And what’s really important to note is that although the rate of inflation may drop back dramatically later this year as predicted, that doesn’t mean prices as a whole will start falling."
Read More: Britain's Tesco Expects Flat Profit In FY 2023-24
News by Reuters, edited by ESM – your source for the latest retail news. Click subscribe to sign up to ESM: European Supermarket Magazine.
