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UK Inflation Accelerates On Motor Fuel, Clothing Prices

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UK consumer price inflation accelerated in March driven by motor fuel and clothing prices, data from the Office for National Statistics showed on Wednesday.

Consumer prices advanced 0.7 percent year-on-year, faster than the 0.4 percent increase seen in February. But inflation was slightly below economists' forecast of 0.8 percent.

The upward contribution came from clothing and footwear and motor fuel prices. Clothing and footwear prices grew 1.6 percent on month despite discounting. The upward contribution from motor fuels was the first since February 2020.

On a monthly basis, inflation rose to 0.3 percent, as expected, from 0.1 percent a month ago. This was the second consecutive increase.

Core inflation that excludes prices of energy, food, alcoholic beverages and tobacco, climbed to 1.1 percent from 0.9 percent. The annual rate matched economists' expectations.

The latest rebound in overall inflation was the start of a rise to about 1.5 percent in the next few months and to above 2 percent by December, Paul Dales, an economist at Capital Economics, said.

"But as we doubt inflation will stick above 2.0% until late 2023, we think the markets are wrong to assume that interest rates will rise in late 2022," the economist added.

Another report from the ONS showed that output price inflation came in at 1.9 percent in March, up from 0.9 percent in February and the expected rate of 1.7 percent.
This was the third consecutive month the rate has been positive and was the highest annual rate since April 2019.

Meanwhile, monthly growth in output prices eased to 0.5 percent from 0.7 percent in the prior month. The expected rate was 0.3 percent.

Input price inflation accelerated to 5.9 percent from 3.3 percent in February. On month, input prices gained 1.3 percent versus 0.9 percent in the previous month.

Economists had forecast input prices to grow 4.4 percent annually and by 0.6 percent from the previous month.

In a separate communiqué, the ONS said house price inflation hit the highest level in more than six years in February. Average house prices grew 8.6 percent year-on-year in February, faster than the 8 percent increase in January. This was the fastest growth since October 2014.

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