UK inflation hits 2.3%, highest since September 2013

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Annual inflation in the UK grew faster than expected in February, hitting 2.3 per cent and rising above the Bank of England’s inflation target for the first time since 2013.

Official data from the Office for National Statistics showed prices rose 0.7 per cent over the month. Analysts had expected a 0.5 per cent rise.

The higher than expected increase, after a fall at the start of the year, meant the year on year figure also beat forecasts of a 2.1 per cent rise.

Rising transport costs were the main drivers, while food prices also increased for the first time in 31 months. The 0.1 per cent increase in food prices follows recent surveys from Kantar Worldpanel which has shown sales growth at UK grocers picking up after years of deflation.

However core inflation, which strips out the impact of volatile energy and food prices, also jumped ahead of expectations, rising 2 per cent year on year compared to expectations of a 1.7 per cent rise.

In a sign that the recent rises are likely to continue, the ONS also reported the biggest annual increase in factory gate prices in more than five years. Output producer prices were 3.7 per cent higher than in February 2015, up from 3.5 per cent in January.

The producer price index, which tracks prices paid and charged for materials and fuels by manufacturers, can be seen as an early gauge of inflationary pressures which may be passed onto consumers later.

Jonathan Athow, ONS deputy national statistician, said:

Inflation has risen to its highest rate for almost three and a half years with price increases seen across a range of items but with food and fuel having the largest impact.

Prices for manufacturers stayed broadly constant in February, though the annual growth rate for goods leaving the factory gate remains at levels not seen since 2011.

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