UK inflation hits new four-year low in February

Lower petrol prices helped inflation in the UK fall to a new four-year low of 1.7 per cent in February and narrow the prolonged squeeze on wages, official figures showed Tuesday.

It was the fifth monthly slowdown in a row and will support hopes that the real-term decline in pay is coming to an end - with private sector earnings already appearing to have caught up.

The Consumer Prices Index (CPI) rate fell from 1.9 per cent in January as it continued to undershoot the Bank of England’s target of 2 per cent, the Office for National Statistics said.

The CPI has not been lower since October 2009, when it stood at 1.5 per cent.

Wage growth has not been higher than inflation for nearly four years but last week official Budget forecasts predicted that earnings would return to real terms growth later this year.

The fall in inflation to 1.7 per cent was widely expected by economists. It suggests private sector pay growth — which was also 1.7 per cent in the three months to January — has already caught up. However total wages are only rising by 1.4 per cent, with ordinary public sector workers seeing a rise of just 0.9 per cent, according to the latest figures.

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.

The latest inflation figure was partly driven down by a fall in petrol prices of 0.8p per litre between January and February this year, compared with a 4p rise for the same period in 2013. Diesel was also down by 0.8p, compared with a 3.7p increase the year before, the ONS said.

Meanwhile, energy bills saw a combination of prices and cuts, compared with an overall rise for the same period in 2013. The price of men’s and women’s outerwear also rose by less than last year.

In contrast, large furniture became more expensive and books were 6.6% dearer on the year. There was also upward pressure on inflation from tablet computers and printers.

Inflation in food and non-alcoholic drinks fell to a near four-year low of 1.8 per cent, the lowest since May 2010 when it was the same. It was last lower in February 2010.