UK inflation slows despite expectations

On Wednesday, data from the UK’s Office for National Statistics unveiled the consumer price index with an annual increase of 2.8% for February, declining from January’s 3% rise. Economists had predicted a climb of 3%.

On the other hand, core inflation, which excludes prices of energy, food, alcohol and tobacco, dropped to 3.5% from 3.7% last month, lower than the economists’ forecast of 3.6%.

Monthly consumer prices showed an uptick to 0.4%, contrary to the 0.1% fall in January. Economists had forecast prices to increase 0.5%.

“February’s slowdown is a false dawn as notable near-term price rises are already baked in,” warned Suren Thiru, economics director at accountancy body ICAEW, as they raise concerns on an expected climb in next month’s energy costs and national insurance that is likely to push up inflation soon. The central bank expects consumer price inflation to peak at 3.75% in the third quarter of this year.

Meanwhile, consumer confidence in Germany improved slightly, following parliamentary elections. Data from the GfK market research institute and the Nuremberg Institute for Market Decisions (NIM) reported slight progress for April’s forecast to -24.5 points from -24.6 points in March. Analysts polled by Reuters had predicted sentiment to advance to -22.7 points. As economic and income expectations and the willingness to buy continue to improve, consumers remain eager to save, which may restrain a more significant recovery.

Rolf Buerkl, a consumer expert at the NIM, explained how this attitude may be coming from a place of uncertainty, and that a new government would be essential for reassurance. Parliament has passed proposals for a €500 billion special fund for infrastructure and to remove caps on lending for defence spending.

Finally, US Gross Domestic Product (GDP) grew following a revision. On Thursday, data released by the Commerce Department recorded an uptick to the GDP, which surged by 2.4% in the fourth quarter of 2024, compared to the previously reported 2.3% jump. The upward revision primarily showed a decline in imports, which are a subtraction in the calculation of GDP. Consumer spending also declined following corrections, limiting GDP upside. Despite the positive change, the GDP growth in the fourth quarter still depicts a slowdown from the 3.1% surge in the third quarter of last year.

This article does not constitute legal and/or financial advice and is being issued for information purposes only by Bank of Valletta plc, 58, Zachary Street, Valletta. Bank of Valletta is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap. 370 of the Laws of Malta).