Inflation falls to 3.4%

UK inflation fell to 3.4% in February, down from 4% in January, beating economists expectations of 3.5% as food inflation continued to ease.

The largest downward contributions to the monthly change in both CPIH and CPI annual rates came from food, and restaurants and cafes, while the largest upward contributions came from housing and household services, and motor fuels.

Core CPI (excluding energy, food, alcohol and tobacco) rose by 4.5% in the 12 months to February 2024, down from 5.1% in January; the CPI goods annual rate slowed from 1.8% to 1.1%, while the CPI services annual rate eased from 6.5% to 6.1%.

The annual rates for most types of food product eased between January and February 2024, with the largest effect coming from bread and cereals. Overall, prices for bread and cereals rose by 0.3% on the month, compared with a rise of 2.3% between January and February 2023. Prices of packs of cakes and some bread products (for example, white sliced loaves) fell between January and February this year but rose a year ago. The resulting annual rate for bread and cereals in February 2024 was 6.0%, the lowest observed since March 2022.

Other smaller downward effects came from classes such as meat, vegetables, and milk, cheese and eggs. Overall, the annual rate eased in 10 of the 11 food and non-alcoholic beverages classes with oils and fats the exception; its annual rate rising from 8.0% in January to 8.3% in February 2024.

The easing in the rate also reflected a downward effect from restaurants and cafes, where prices rose by 0.7% on the month, less than the 2.1% rise between January and February 2023. The downward contribution was largely driven by the prices of alcohol, such as gin, whisky and various beers.

Finally, prices in the transport division fell by 0.4% in the year to February 2024, compared with a fall of 0.5% in January.

ONS chief economist Grant Fitzner said: “Inflation eased in February to its lowest rate for nearly two and half years. Food prices were the main driver of the fall, with prices almost unchanged this year compared with a large rise last year, while restaurant and café price rises also slowed. These falls were only partially offset by price rises at the pump and a further increase in rental costs.”