By Jonathan Davies
The rate of inflation in the UK fell to 0.0% in February, according to the Office for National Statistics (ONS).
The figure is the lowest since records began and was lower than many market analysts had predicted.
The ONS said that the prices of recreational goods (things like data processing equipment, books and games, toys & hobbies), food and furniture & furnishings were the main contributors in cutting inflation from January's rate of 0.3%.
There is usually at least one area in which prices rise quicker, therefore offsetting the fall in inflation. But the ONS said there were no major upward effects in February.
The latest unemployment figures released by the ONS last week showed that average wages were up 1.8% in the three months to January. Coupled with today's flat inflation figures, it means that real-term wages are growing by 1.8%
Rain Newton-Smith, Director of Economics at business lobby group the CBI, said: “Despite inflation dropping to zero, it is unlikely we will see falling prices for a prolonged period, particularly as the pressure from lower oil prices fades.
“While lower oil prices are cutting costs for businesses, and leaving households with more money in their pockets, North Sea oil producers are taking a hit. The measures to support the industry in the Budget will help address concerns over job losses and investment freezes, but it is not out of the woods yet."
Jeremy Cook, chief economist at the international payments company, World First, said: “The question is now how much further and for how long can the number remain this low? While these ‘transitory’ moves in commodity markets may fade out of the inflation basket by the end of the year, there is a lot to be said for inflation being hurt further by so-called second round effects, particularly in wage negotiations. That may have already started given the fall in core prices from 1.4% to 1.2%.
“We are looking for a couple of months of deflation in the UK. Overnight news from China that has seen a fall in the country’s manufacturing sector output is a natural depressant of commodity prices and will remain a weight on global inflation through the rest of the year.”