Partly Cloudy

Partly Cloudy

max temp: 20°C

min temp: 10°C

ESTD 1874 Search

The pigs are coming. Find out more about

Pigs Gone Wild

here.

Economy: CPI inflation falls to its lowest in more than four years

09:49 17 June 2014

The Bank of England in London. Inflation  remained within the bank

The Bank of England in London. Inflation remained within the bank's 2.0% target last month, official data showed today.

Inflation fell sharply to a four-and-a-half-year low in May as supermarket price wars pushed food and drink costs to their steepest decline in nearly a decade.

The Consumer Prices Index (CPI) measure of inflation dropped more heavily than expected to 1.5%, from 1.8% the month before, the Office for National Statistics (ONS) said.

CPI now equals the rate seen in October 2009 and was last lower, at 1.1%, in September 2009.

The latest figures mark the sixth month in a row when the rate has been at or below the Bank of England’s 2% target, the first time this has happened since 2009.

Air fares, which were lower due to the timing of Easter, had a significant downward effect, while petrol pulled in the other direction as pump prices crept up.

Food and non-alcoholic beverages fell by 0.6% year on year, the sharpest fall since October 2004. The last time there was a decline was in March 2006.

Supermarket staples such as bread and cereals, meat, vegetables and soft drinks led the drop.

Tesco, Asda, Sainsbury’s and Morrisons have been battling on price as they face an increasing threat from discounters Aldi and Lidl gnawing at their market share.

Meanwhile, lower womenswear prices saw clothing and footwear record negative inflation for the first time since April last year.

Despite the drop in inflation, it remains well above the rate of wage increases, which have fallen to 0.7%, meaning real-terms pay is still stalling.

A separate measure of inflation, the Retail Prices Index (RPI) which includes housing costs, fell to 2.4% from 2.5% the month before.

Samuel Tombs, UK economist at Capital Economics, said the latest CPI figure suggested the Bank of England’s Monetary Policy Committee (MPC) would act cautiously in raising interest rates.

“May’s drop in UK consumer price inflation demonstrates that strong growth in economic activity is not prompting underlying price pressures to build.

“The fall in CPI inflation to 1.5% was larger than the consensus estimate (1.7%) and left inflation at its lowest level since late-2009. May’s figure also confirms that the pick-up to 1.8% in April was entirely due to the later timing of Easter this year.

“Looking ahead, it continues to look likely that CPI inflation will ease further, perhaps to as low as 1% by the end of the year. For a start, sterling’s further appreciation points to a continued easing of core goods inflation over the rest of this year. So too does the recent weakness of producer output price inflation, which separate figures today show was just 0.5% year-on-year in May.

“Meanwhile, a combination of political pressure and recent sharp falls in wholesale prices should ensure that any rises in consumer energy bills later this year are much smaller than seen last winter. And while these downward influences on inflation will be temporary, we still believe there is considerable scope for productivity growth to pick up, keeping inflation low over the medium term.

“Against this low inflation backdrop, we believe the MPC is likely to tread cautiously and raise interest rates only very gradually over the coming years.”

1 comment

  • What a load of tory propaganda !, firstly they change from the 'Retail' price index, to manipulate the figures easier, then they think this is success !, the reason prices are falling is because 'Demand' has fallen because of their austere policies !!, people are so hard pressed, they are spending less !

    Report this comment

    freedomf

    Tuesday, June 17, 2014

The views expressed in the above comments do not necessarily reflect the views of this site

Spending on Eating Out remained robust during April, according to a survey carried out for Greene King.

Britons continued to enjoy eating out during April, according to a new survey, despite reports of growing concern over the strength of the UK economy and the potential impact of a vote to leave the EU in next month’s referendum.

Meeting organised by the Institute of Directors about Suffolks burgeoning film industry. Julien Mery, co-founder of Livid Films and director of Film Suffolk, discussed how the creative community in Suffolk is putting the county on the UK and worlds creative industry map. L-R Sarah Brown, Graham Kill, Julien Mery and Old Jet's Jesse Quin.

A group of executives got to see the creative side of Suffolk’s economy at one of the county’s most popular filmmaking locations.

Oliver Paul, owner of the Suffolk Food Hall, DEFRA Secretary Liz Truss, South Suffolk MP James Cartlidge and Babergh District Councillor Jennie Jenkins meet for an informal meeting on the outcome of the RDPE funding provided for the commercial artisan kitchens in the Cookhouse at the Suffolk Food Hall.

Apprenticeship Levy funding from major supermarket chains and food manufacturers could deliver a boost to skills training for smaller food businesses and farming, a senior Government minister has said during a visit to Suffolk.

The Inspirations shop in Wickham Market,owned by shareholders in the community, is now officially open. Nick Denny from the Co-op cut the ribbon.

The much anticipated transformation of a Suffolk village’s former supermarket into a new community retail venture was celebrated this week - four years after the site was last in use.

New-build utility connections specialist Brookfield Utilities has reported increased annual profits.
Photo: Rui Vieira/PA Wire

Annual profits at Suffolk-based Brookfield Utilities have increased by more than one-third as it continues to add to the number of properties it connects.

Most read

Great Days Out

cover

Click here to view
the Great Days Out
supplement

View

Most commented

HOT JOBS

Show Job Lists

Streetlife

Newsletter Sign Up

Great British Life

Great British Life
MyDate24 MyPhotos24