INFLATION slowed down in February amid falling clothes prices and rising fuel costs, according to new figures.
The Consumer Price Index (CPI) rose by 0.4% in the 12 months to February this year but was down from a 0.7% rise to January and 0.6% rise in December.
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Falling prices of clothes, second-hand cars and toys were one of the leading reasons behind the slow-down, reports the Office for National Statistics (ONS).
Prices typically rise between the first two months of the year as post-Christmas sales come to an end in January.
But this year, clothing and footwear prices fell by 1.5% between January and February, compared to a 0.9% rise in 2020. Womenswear was hit the hardest.
This odd price pattern has been seen throughout 2020 as the coronavirus crisis again wreaked havoc on spending and sales.
What does inflation matter?
INFLATION is a measure of the cost of living. It looks at how much the price of goods, such as food or televisions, and services, such as haircuts or train tickets, has changed over time.
Usually people measure inflation by comparing the cost of things today with how much they cost a year ago. The average increase in prices is known as the inflation rate.
The government sets an inflation target of 2%.
If inflation is too high or it moves around a lot, the Bank of England says it is hard for businesses to set the right prices and for people to plan their spending.
High inflation rates also means people are having to spend more, while savings are likely to be eroded as the cost of goods is more than the interest we’re earning.
Low inflation, on the other hand, means lower prices and a greater likelihood of interest rates on savings beating the inflation rate.
But if inflation is too low some people may put off spending because they expect prices to fall. And if everybody reduced their spending then companies could fail and people might lose their jobs.
See our UK inflation guide and our Is low inflation good? guide for more information.
Clothes and shoe prices typically fall each year between June and July in summer sales as retailers prepare for autumn ranges to come in, and then rise before sales towards the end of the year.
However, 2020 saw increased sales in March and April due to lockdown, and then a price fall in November at a time when they would normally rise, as a second shutdown hit.
The falling price of second-hand cars also helped push inflation down, as last year they became more expensive as people sought alternatives to publish transport.
One of the biggest drivers of the small rise was fuel prices, which have increased over the past month compared with a fall seen last year.
Petrol prices rose by 3.6p a litre to 120.2p per litre, while diesel costs went up by 3.4p per litre to 124.6p per litre.
In comparison, between January and February 2020, petrol and diesel prices fell by 2.4p and 3.2p per litre, to stand at 124.5p and 129.3p per litre, respectively.
Since January, the UK has been plunged into a third national lockdown, with businesses, including pubs and non-essential retail, having to temporarily close to curb the spread of Covid-19.
ONS deputy national statistician for economic statistics Jonathan Athow said “the impact of the pandemic has disrupted standard seasonal patterns”.
Sarah Coles, personal finance analyst, Hargreaves Lansdown explained what it means for the cash in your pocket.
“It means we need make the most of our savings,” she said.
“This starts with shopping around for a competitive easy access account for three to six months’ worth of essential expenses.
“If your cash is in a high street savings account paying 0.01%, you can’t afford to keep it somewhere so unrewarding.
“Next, consider fixing the rest of your savings for the most suitable periods, in order to lock in a better rate.
“You can currently make up to 0.65% if you fix for a year or 0.8% by fixing for two years.”
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