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Sharp fall in clothes and car prices lowers the UK’s rate of inflation

Sharp fall in clothes and car prices lowers the UK’s rate of inflation
Sharp fall in clothes and car prices lowers the UK’s rate of inflation

A sharp drop in the prices of clothes and second-hand cars has reportedly resulted in an unexpected fall in the United Kingdom’s the rate of inflation in February 2021. As per the Office for National Statistics (ONS), the rate dropped to 0.4 per cent in the previous month, down from 0.7 per cent in January 2021.

While economists had expected that inflation would rise slightly owing to the rising prices of fuel and energy, the impact of increasing fuel prices was offset greatly by downward pressures in other areas, comprising toys and travel costs.

Sources cite that February is conventionally a month where the prices of clothing would surge. But as per Jonathan Athow, the Deputy National Statistician, ONS, the effect of the COVID-19 pandemic has caused a disruption in the standard seasonal patterns.

According to Hannah Audino, a PwC economist, as lockdowns are relieved, inflation will tick higher as customers unbridle some of the £150 billion of additional savings on the economy that have been accumulated during 2020. In addition, enterprises will also be looking to recoup lost revenues from 2020 even though the extension to the VAT cut for the leisure and hospitality sector will continue to put some downward pressure on prices.

For the record, the prices of footwear and clothing dropped between January and February for the first time since 2007 and are 5.7% lower as compared to 2020. This is the largest annual decline since November 2009.

As per the ONS, the prices of second-hand cars had been escalating during 2020 as people sought options for avoiding use of public transport. ONS also added that between the months of January and February, petrol prices escalated by 3.6 pence for every liter, and diesel prices increased by 3.4 pence for every liter.

Source credit: https://www.bbc.co.uk/news/business-56502286

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