Wednesday, 18 January 2006

UK CPI shows little inflation but house prices accelerates

Following the previous day's news, yesterday provided further evidence that inflation in the UK is subdued.

The Office for National Statistics said the consumer price index rose by 0.3 percent for a 2.0 percent annual gain, in line with forecasts. That compared with 2.1 percent in November and was the lowest since June.

Inflation has now eased for three consecutive months since hitting a peak of 2.5 percent last September... The fall in inflation was largely due to falling petrol and diesel prices...

Core CPI, which excludes volatile items like food, energy, alcohol and tobacco, slowed to 1.3 percent on the year, its weakest in 10 months...

Retail price index inflation, or RPI, on which most pay deals are based, slowed more than expected to 2.2 percent from 2.4 percent in November, the weakest since October 2002...

For the full year 2005, the ONS said CPI averaged 2.1 percent, the highest since records began in 1997.

But house prices may be turning up again.

The Royal Institution of Chartered Surveyors (RICS) said that house-price growth had accelerated last month. Its balance of surveyors reporting a rise in prices minus those reporting a fall rose to plus 8, from plus 4 the previous month after 15 months of negative numbers...

Surveyors said that they expected modest price rises in the next three months, with expectations that interest rates will fall further boosting buyer confidence. The number of new buyers rose for the seventh month in a row, the longest unbroken run since 1999.

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