Inflation dips to 12-month low after slower rise in clothing and footwear prices

Economists were expecting inflation to hold steady at 2.7%.

The largest downward pressure came from footwear and clothing, having risen by just 0.7% on a monthly basis in March compared with 2% over the same period in 2017, which had been a relatively large rise compared with previous years.

Sterling fell 0.5% against the dollar to 1.42 following the news. Against the euro, the pound was trading 0.3% lower at 1.15.

ONS head of inflation Mike Hardie said: “Inflation fell to its lowest rate in a year, with women’s clothing prices rising slower than usual for the first time this year.

“Alcohol and tobacco also helped ease inflation pressures, with tobacco duty rises linked to the Budget not appearing this March, thanks to its new autumn billing.”

Chancellor Philip Hammond has changed the timing of the Budget from the spring to autumn, meaning bigger Government decisions which might have affected tax and prices were announced later in the year.

It meant tobacco prices rose just 0.1% in March, versus a 2% month-on-month rise last year.

Mr Hardie added: “Growth in the price of goods leaving factories continued to slow, mainly due to a smaller increase in the price of food products compared with this time last year.”

Food prices rose 0.3% compared with a month earlier, versus a 0.6% rise over the same period in 2017, with fruit and fish applying the most downward pressure, having fallen 1.4% and 1.3% respectively.

However, the cost of oil and fats surged 6.7% in March, past the 2.8% rise last year, with margarine applying notable upward pressure.

Experts had forecast that the earlier Easter holidays would push up costs of airfares. Figures showed air transport falling 2.1% month on month, a smaller decline than the 3.9% fall in March 2017.

At the pumps, motorists also faced lower fuel costs last month, with petrol down by 1.6p per litre on the month to 119.2p per litre.

Diesel also fell 1.5p to 122.9p.

The Retail Prices Index (RPI), a separate measure of inflation, was 3.3% last month, down from 3.6% in February.

The Consumer Prices Index including owner-occupiers’ housing costs (CPIH) - the ONS’ preferred measure of inflation - was 2.3% in March, down from 2.5% in February.