UK inflation falls to 4.8 pct, 2nd straight drop

AP News
Posted: Dec 13, 2011 5:01 AM
UK inflation falls to 4.8 pct, 2nd straight drop

Inflation in the United Kingdom fell to 4.8 percent in November, official figures showed Tuesday, boosting confidence that the recent run of big price rises increases is ending.

November's rate, announced by the Office for National Statistics, represents the second straight 0.2 percentage point monthly drop. The decline arose as lower prices for food, petrol, clothing, furniture and household equipment offset higher costs for domestic heating and alcoholic beverages.

However, the drop will provide limited relief to households under pressure from low growth and rising unemployment.

"With inflation at 4.8 percent but employee pay growth at just 2.3 percent per annum, real incomes are still falling at a rate which will inevitably squeeze consumer spending in the lead up to Christmas and early next year," said Chris Williamson, chief economist at financial data company Markit.

November was the 24th consecutive month that inflation has been above the Bank of England's official target of around 2 percent. However, the Bank's concern has turned to slow growth in the economy, and in October it authorized 75 billion pounds ($117 billion) of asset purchases in an effort to stimulate growth.

The Bank has projected big declines in inflation over the coming year as higher sales tax falls out of the annual comparison and the faltering economy continues to rein in wage demands. The bank halved its forecast for economic growth in 2012 to 1 percent, and pared its projection for 2013 by half a point to 2.5 percent.