Weak pound protects inflation

Gross domestic product (GDP) across the developed world will slump more than four per cent this year but the UK's consumer price index (CPI) enjoyed an unexpected spike in February.

Figures from the Organisation for Economic Co-operation and Development (OECD) finds GDP will tumble by an average of 4.3 per cent this year across its 30 member countries. World economic activity is set to shrink 2.7 per cent this year as international trade plummets 13 per cent.

The US will see GDP down four per cent this year but will start to recover early next year and will have a flat 2010, the OECD predicts. Japan is set to endure a torrid 2009 as a shrinking export market fuels a 6.6 per cent drop in economic output.

The CPI tracks the cost of consumer goods and services and its fluctuations are used as a measure of inflation. In the US the CPI rose 0.2 per cent year on year in February, while in Japan it dropped 0.1 per cent. The CPI experienced year-on-year rises of 1.6 per cent in Italy, 1.4 per cent in Canada, one per cent in Germany and 0.9 per cent in France.

In the UK, partly fuelled by the pound's continued weakness, the CPI confounded economists' expectations by spiking 3.2 per cent year on year in February. Monthly growth stood at 0.8 per cent, outstripping the US, Japan, Canada, France, Germany and Italy.