Inflation figure suggests the UK economy is yet to accelerate beyond stall speed

“Chancellor of the Exchequer George Osborne is already under the cosh after the political fall-out from last week’s Budget continues to rattle the Government and he will not be able to draw any comfort from either of today’s inflation and public borrowing figures", says Russ Mould, AJ Bell Investment Director.

“A February year-on-year inflation figure of 0.3%, as measured by the consumer price index (CPI) is way below the Bank of England’s 2.0% target and suggests the UK economy is yet to accelerate much beyond stall speed.

“Falling transport, soft drink and food prices appear to be the main drags on the CPI measure, even as restaurant, hotel and education prices rise. There is little sign yet of the near-50% rebound in oil prices having any effect although this could start to make itself felt in the March data.

“Meanwhile, the cumulative public sector borrowing requirement (PSBR) of £70.7 billion compares to Mr Osborne’s full-year target of £72.2 billion, so barring a remarkable drop in borrowing in March (from £7.3 billion last year) the Chancellor is going to overspend by more than expected.

“If the Government can draw any succour from today’s one-two punch it is that interest rates are unlikely to rise rapidly, even after 84 months at a record low 0.5%. This will at least ease the cost of servicing its borrowings and give consumers a chance to make the most of any oil price windfalls.”

Source: ONS. NOTE: Past performance is not a guide to future performance and some investments need to be held for the long term.

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