House Price Concern As Wider Inflation Eases

There has been more good news for household budgets with confirmation that price growth eased further in March though property costs accelerated.

The Office for National Statistics (ONS) charted a fall in the Consumer Prices Index (CPI) measure of inflation to an annual rate of 1.6% - down from 1.7% in the previous month - which marked a new four-year low.

This was driven, the ONS said, by falling pressures from fuel costs.

Petrol prices were unchanged between February and March

Furniture and clothing also made downward contributions - with discounting in women's fashion leading the way.

Upward contributions to inflation came from factors including higher bills for overnight hotel stays and more expensive alcoholic spirits.

The figures raised hopes that a milestone in the UK's economic recovery could be reached as early as Wednesday, when the ONS releases the latest unemployment and wage statistics.

Many economists believe they will show pay packets rising at a faster level than inflation.

George Osborne has welcomed easing inflation figures

Earnings have not increased at a higher rate than inflation since a brief spike in March and April 2010 and have not consistently been improving since 2008.

However, separate ONS figures on Tuesday pointed to a steep rise in annual house price inflation of 9.1% over the 12 months to February.

It represented the biggest increase since June 2010 and was up sharply on the 6.8% rise measured in January as London's rapid price growth started to be mirrored outside the capital.

The performance renewed fears the UK housing market is at risk of overheating though policymakers have repeatedly pledged to remain vigilant.

The housing charity Shelter said: "Today's figures are yet more evidence that house prices are spiralling out of control.

"Apart from the lucky few who can rely on the bank of mum and dad, our runaway housing market is forcing a generation to watch a home of their own become an increasingly distant dream, no matter how hard they work or save."

European economist at Schroders, Azad Zangana, told Sky News he expected the Bank of England to intervene on house price inflation in the summer.

The TUC leader Frances O'Grady says a cost of living crisis remains

The wider inflation numbers - which strip out housing costs - were welcomed by the Chancellor.

George Osborne said: "Lower inflation and rising job numbers show our long term plan is working, and bringing greater economic security."

The general secretary of the union organisation the TUC, Frances O'Grady, said workers remained £40-a-week worse off than before the financial crisis.

UK economist at Scotiabank, Alan Clarke, said the latest CPI reading was likely to mark the low point in UK inflation as a rebound is likely to come from the impact of Easter holidays on airfares.

However, he saw real-terms wage growth accelerating to counter that effect.

He said: "At the moment, consumer spending growth is being boosted by falling savings and rising borrowing.

"If real incomes continue to improve over the coming quarters (as we expect), then spending growth will be increasingly underpinned by solid fundamentals rather than the feel-good factor associated with a booming housing market."

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