Middle East instability raises immediate inflation concerns
Responding to the latest CPI inflation figures, which show headline inflation holding at 3.0% and food inflation falling to 3.3%, Harvir Dhillon, economist at the British Retail Consortium, said: “Headline inflation held in February as high costs continued to filter through. Across retail, clothing and footwear inflation prices rose on the year for the first time in four months while food inflation dipped marginally. Many families will continue to feel the cumulative impact of previous price increases and as conflict in the Middle East blocks key trading routes (with both energy and fertiliser affected), there is a significant risk that inflation will pick up again in the coming months. There was, however, some good news for those with a sweet tooth as the price of chocolate and confectionary fell on the month.
“Retailers continue to do everything they can to keep prices down for customers, but margins remain extremely tight. Heightened geopolitical tensions in the Middle East are very likely to increase energy and transport costs in the months ahead, creating additional pressures for consumers and businesses alike across the economy. If commodity price increases are sustained, inflation will not fall to the 2% target this year. It is therefore important that the government does what it can to avoid adding further burdens onto businesses, to help limit the risk of higher prices, reduced investment and fewer jobs.”
Notes:
- ONS Consumer Price Index figures
| Year on Year changes | Jan-26 | Feb-26 |
| CPI (overall index) | 3.0% | 3.0% |
| 01 Food and non-alcoholic beverages | 3.6% | 3.3% |
| 02 Alcoholic beverages and tobacco | 4.6% | 3.6% |
| 03 Clothing and footwear | 0.0% | 0.9% |
| 04 Housing, water, electricity, gas and other fuels | 4.5% | 4.6% |
| 05 Furniture, household equipment and maintenance | -0.5% | 0.1% |
| 06 Health | 3.1% | 3.1% |
| 07 Transport | 2.7% | 2.4% |
| 08 Communication | 4.6% | 4.3% |
| 09 Recreation and culture | 2.6% | 2.5% |
| 10 Education | 5.1% | 5.1% |
| 11 Restaurants and hotels | 4.1% | 4.0% |
| 12 Miscellaneous goods and services | 2.2% | 2.6% |