Roundup: British inflation rate falls to zero in Feb., further step towards deflation

British inflation rate fell to zero in February, the lowest reading since records began, taking a further step towards deflation, official data showed Tuesday.

Foods and motor fuels prices slump is the main contributor to the zero growth of yearly inflation rate. Analysts here reckon that the low inflation or the potential deflation environment would be temporary, and it would probably boost the consumption as well as the recovery.

FOODS, FUELS PRICE

Britain's consumer prices index (CPI) grew by zero percent in the year to February 2015, down from the 0.3 percent in January, said the Office for National Statistics (ONS).

The main contribution to the slowdown in the rate came from price movements for a range of recreational goods, food and furniture and furnishings, and there were no large upward effects to offset the change, said ONS.

In the year to February 2015, food prices fell by 3.4 percent and prices of motor fuels slumped by 16.6 percent, figures showed. The food and motor fuels groups in total reduced the CPI 12-month rate by around 0.9 percentage points, said ONS.

British consumer prices edged up by 0.3 percent in February 2015 from the previous month, and the core annual inflation rate, which exclude alcohol, tobacco, food and energy prices, rose 1.2 percent on year-on-year basis, data showed.

CPIH, an inflation gauge include consumer prices and owner occupier's housing costs, increased 0.3 percent in the 12-month to February 2015, down from 0.5 percent of the prior month, data also showed.

TEMPORARY EFFECTS

Economists here believe that Britain will see deflation soon.

Martin Beck, senior economic adviser to the EY ITEM Club, said in a note:" There remains a strong chance that we will see a negative reading for CPI inflation over the next couple of months. In particular, three of the big six energy providers (in Britain) cut their gas prices in the second half of February."

However, "the weekly petrol price data from DECC (Department of Energy and Climate Change of Britain) suggests that the plunge in petrol prices has bottomed out. ... This will lessen the downward pressure on inflation from petrol by a little," he noted.

The independent economic forecaster expects that the Bank of England, British central bank, would not raise interest rate until early 2016.

Vicky Redwood, Chief UK Economist at Capital Economics, highlighted in an analysis piece:" A brief period of gently falling prices driven by lower energy prices is nothing to be feared."

In Britain, deflation will be a "good thing" for the economy, as it will boost the households' incomes and support economic recovery, he said.

Data showed that British employee's total pay was 1.8 percent higher in the three months to January, when compared to that of a year prior. Endit