INFLATION fell for the sixth month in succession in March paving the way for an end to the prolonged squeeze on wages, official figures showed today.

The Consumer Prices Index (CPI) rate dropped to a new four-year low of 1.6%, from 1.7% in February, according to the Office for National Statistics (ONS).

It comes a day ahead of separate ONS labour market statistics which are expected to show that regular pay is rising at a rate of 1.8%, up from 1.3%.
CPI has not been lower since October 2009, when it stood at 1.5%. The latest fall in inflation was widely expected by economists.

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It is likely to herald an end to a six-year period when pay growth has been lagging behind the rise in the cost of living, effectively shrinking workers spending power.

Chancellor George Osborne said: "These latest inflation numbers are welcome news for families.

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

"But there is still much more we need to do to build the resilient economy I spoke of at the Budget."

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.

An end to the squeeze will be seen as a watershed moment in the recovery, and likely to be seized upon by the Coalition to blunt Labour charges that the economic upturn has yet to benefit ordinary working families.

The latest figures showed pressure on households was partly eased by food and non-alcoholic drink inflation falling to a new four-year low of 1.7%. It was last lower, at 1.3%, in February 2010.

But a greater downward pressure on inflation came from fuel pump prices.
Petrol was unchanged from February to March this year compared to a rise of 2.2p per litre at the same period in 2013. Diesel fell by 0.4p compared with a 1.9p rise in 2013.

Clothing and footwear prices increased by a lower rate than last year, with much of the downward effect from womens fashions.

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

A separate measure of inflation, the Retail Prices Index, which includes housing costs, fell to 2.5% in March from 2.7% in February.

And a new measure of inflation, CPIH, which also includes housing costs, fell to 1.5%, down from 1.6% in February.

TUC General Secretary Frances O’Grady said: “Workers are now £40 a week worse off than before the crash. 

“Those waiting to hail the first month in which wages creep higher than prices as recovery will show how out of touch they are with the lives of ordinary people, especially on a measure of prices that does not include housing costs.

“A real recovery will deliver rising real wages that recover spending power lost since the crash and generate decent jobs with good pay, security and prospects. That remains a distant prospect.”