The consumer price index, the primary measure of inflation, shows a softer path in March as it increases 0.7% from a year earlier. This marks a slowdown from February, when the year-on-year pace had already eased to 1% after January’s 2.1% peak. Analysts had broadly expected March to mirror February’s 1% gain, but the official data released by the Office for National Statistics revealed a smaller uptick by 0.3 percentage points compared with those forecasts, underscoring a gentler inflation climate.
One economist, Dong Lijuan, attributed the softer rise to lower prices in gasoline and diesel, with vegetables contributing significantly to the decline. Fresh vegetable prices dropped sharply, declining 11.1% year over year, while other food items also softened, helped by improved harvests and higher temperatures that broadened supply. Dong pointed out that March witnessed a continued production rebound and ample consumer supplies, which collectively pushed prices downward.
On a month-to-month basis, the CPI fell 0.3% from February, a decline that still surprised market participants who had anticipated no change. This monthly decrease indicates a reset in price dynamics amid changing demand and supply conditions as the economy navigates post-pandemic shifts and seasonal patterns.
The same day, the Office for National Statistics released the producer price index, which tracks price changes at the factory gate. The PPI fell 2.5% year over year in March, a step down of 1.1 percentage points from the previous month. The month-to-month reading remained flat for the second consecutive period, aligning with expert expectations and signaling continued margin pressure for producers as input costs unwind after earlier inflation spikes. Dong noted that the PPI has been on a downward trajectory for several months, influenced by base effects from the strong inflation seen in the final months of 2021 and the early months of 2022.
Despite the ongoing year-on-year decline, the PPI’s flat monthly reading underscores a mixed inflation landscape. While consumer goods and services soften on an annual basis, the broader inflation dynamic continues to be shaped by global commodity prices and by domestic supply conditions that can offset price declines in some sectors as others stabilize. Market watchers will be watching whether this pattern persists, affecting wage dynamics, consumer sentiment, and the pace of monetary policy adjustments in nearby economies.