A steep decline in petrol costs last month sent the UK inflation rate plummeting to a four year low of 1.7%, office statistics have indicated.
The fall represents the second consecutive month that the Consumer Prices index rate has been lower than the Bank of Englandís previous goal of 2%, having dropped to 1.9% in January.
And the rate displayed on the CPIís measuring counterpart, the Retail Prices Index, also dropped to 2.7% in February, down from the previous 2.8% displayed in January.
The Office for National Statistics (ONS) has primarily attributed the fall on both indexes to the downward trajectory of petrol prices between January and February, with it estimated that they dropped by 0.8p per litre in the period between
January and February this year, which is substantially lower than the 4% rise in petrol prices that occurred during the same period in 2013.
The ONS also disclosed that diesel prices had fallen by 0.8p per litre between January and February, compared to a 3.7% rise at the same point last year.
Other factors that were given to explain the fall in inflation were the slow rate, in which energy prices and clothing costs increased at, as well as footwear and other retail goods.
Real wages begin to pick up
The news of yet another decrease in the rate of inflation will be welcomed by working class and ësqueezedí households, who have seen the gap between wage rises and the cost of living shorten in recent times.
The stagnant rise in worker wages over the past two years, at a rate slower than the increase in inflation has prompted a number of economists and opposition politicians to describe the UK as being in a ëcost of living crisisí, in which households incomes have been ësqueezedí to the brink due to a persistent decline in their real value and spending power.
However, the ONS has identified that wages rose on average by 1.4% in the three months to January, compared to the previous 12 months.
Private sector employeeís were indicated to have been the greatest beneficiaries of the upturn in the trajectory of worker wages, with the ONS identifying that their wages rose by 1.7% in the past three months, marking a significant landmark in which the rise in worker wages have actually caught up with inflation, as described by the Consumer Price Index.
However, public sector employeeís only experienced an average of a 0.9% increase in their wages, signifying that a great deal of work still needs to be undertaken on the UKís economic recovery in order to bring the living standards of all workers back into line with the pre-recession era.
Prime Minister David Cameron argued that the data clearly indicates the success in his governmentís economic policies to get people out of welfare dependence and into work, and called for people to carry on their ëhard workí, so that the upwards trajectory is upheld, moving forward in the future.
“Our long term economic plan is helping provide stability and security for hard-working people,” he said.
Economists have outlined that the drop in the inflation rate will reinforce the Bank of Englandís stance on interest rate rises, and highlights the reality that there is no need to prematurely increase interest rates, whilst worker wages and inflation are picking up whilst they are retained at their current rate.
Howard Archer, chief UK and European economist at IHS Global Insight, forecasted that interest rates will remain at their historic low of 0.5% until at least next year, arguing that the improvement in a number of economic areas means that policymakers will not feel compelled to do so before then.
Samuel Tombs of Capital Economics speculated that the UK inflation rate could continue to drop over the course of this year, potentially falling to as low as 1% by the end of 2014.
“A favourable combination of lower import prices, flat commodity prices and recovering productivity is likely to help CPI inflation fall further, perhaps to about 1% by the end of the year,” he said.