The Consumer Price Index (CPI) and Retail Price Index (RPI) both fell in March, largely due to downward pressure from food and soft drinks prices.
Last month CPI was 4% (February: 4.4%) and RPI stood at 5.3% (February: 5.5%).
The Office for National Statistics said “by far the largest downward pressure” was from food and non-alcoholic drinks, prices of which fell by 1.4% between February and March 2011 compared to a 0.3% increase between the same two months in 2010.
“The downward effects were widespread and reflected supermarket led sales this year. The most notable contributions came from fruit where prices fell by 4.7% this year (also a record February to March movement) but rose by 0.7% a year ago, and bread and cereals where prices fell by a record 2.6% this year compared with a fall of 0.2% a year ago.”
RPIX inflation, which is the RPI figure excluding mortgage interest payments, was 5.4% in March, down from 5.5% in February.
UK inflation rate was above the provisional figure for the European Union (2.8%).
British Retail Consortium director general Stephen Robertson said: “These figures confirm shop prices are not the cause of inflation. They’re actually making the biggest contribution to bringing it down. Our own figures show shop price inflation has slowed to 2.4%, well below CPI at 4% and RPI at 5.3%.
“Consumer demand is weak. In March sales were down more than at any time in the 16 years we’ve been measuring them. As competition for the spending that is available intensifies, retailers’ promotions and discounts slowed food inflation to its lowest since August 2009.
“Inflationary pressure is coming from price shocks including VAT, commodity prices and the weak pound not from rising wages or consumer demand. With households’ disposable incomes under extreme pressure, an increase in interest rates now would be a harmful mistake. It would not address the real causes of inflation.”
