British inflation fell to its lowest in more than two-and-a-half years in June helped by early summer sales of clothes and shoes, easing pressure on cash-strapped households.
The Office for National Statistics said on Tuesday that annual consumer price inflation dropped to 2.4pc from 2.8pc in May - the lowest since November 2009 - beating economists' forecasts for a steady reading.
The biggest downward contribution to the annual rate came from a fall in the prices of clothes and footwear, followed by slower inflation for transport and food.
Chloe Smith, the Economic Secretary to the Treasury, said: "Inflation has more than halved since September, meaning a little less pressure on family budgets.
This lower inflation should support high street spending and growth in the economy in the months to come."
The downward trend in inflation since it hit a three-year high of 5.2pc in September last year is likely to reassure the Bank of England that it was right to inject extra cash into the economy after it extended its asset-buying stimulus programme by £50bn on July 5.
Analysts said the unexpected fall could open the door for even more money printing.James Knightley, senior economist at ING, said: "This gives the Bank of England plenty of room to respond aggressively to the downturn in activity and we suggest that the BoE's Asset Purchase Facility will be expanded to £450bn by the end of 2012."
Core CPI, which excludes volatile food and fuel costs, dipped to 2.1pc in June from 2.2pc in May.
Consumers benefited from a 4.3p fall in the price of petrol at the pump to 132.8p in June and 0.7p dip in diesel to 135.6p. Food prices edged 0.1pc lower.
The ONS said the biggest fall within food came from meat prices, which fell 0.5pc, with reports that the recent washout weather had hit demand for barbecue foods.
The largest upward effect on prices came from recreation and culture, in which the price of digital cameras fell at a slower rate than last year. Alternative measures of inflation also fell, as the retail price index fell to 2.8pc in June, from 3.1pc in May.
Vicky Redwood, economist at Capital Economics, said the drop in inflation was a "pleasant surprise". "Admittedly, this was driven by a sharp drop in clothing inflation, which is probably a temporary result of the poor weather denting clothing sales," she said.
"Nonetheless, we think that evidence is tentatively building that weak activity and large amounts of spare capacity are bearing down on underlying price pressures."
In a sign that pipeline inflation pressures were also easing, British factory gate inflation hit its lowest since October 2009 in June on the back of lower oil prices.
Shop price inflation also slowed last month, as weak demand pushed retailers to offer deep discounts, according to a survey.
Britain's economy entered a technical recession in the first quarter of the year as gross domestic product declined 0.2%, following a 0.3pc drop in the final quarter of 2011.
telegraph.co.uk
The Office for National Statistics said on Tuesday that annual consumer price inflation dropped to 2.4pc from 2.8pc in May - the lowest since November 2009 - beating economists' forecasts for a steady reading.
The biggest downward contribution to the annual rate came from a fall in the prices of clothes and footwear, followed by slower inflation for transport and food.
Chloe Smith, the Economic Secretary to the Treasury, said: "Inflation has more than halved since September, meaning a little less pressure on family budgets.
This lower inflation should support high street spending and growth in the economy in the months to come."
The downward trend in inflation since it hit a three-year high of 5.2pc in September last year is likely to reassure the Bank of England that it was right to inject extra cash into the economy after it extended its asset-buying stimulus programme by £50bn on July 5.
Analysts said the unexpected fall could open the door for even more money printing.James Knightley, senior economist at ING, said: "This gives the Bank of England plenty of room to respond aggressively to the downturn in activity and we suggest that the BoE's Asset Purchase Facility will be expanded to £450bn by the end of 2012."
Core CPI, which excludes volatile food and fuel costs, dipped to 2.1pc in June from 2.2pc in May.
Consumers benefited from a 4.3p fall in the price of petrol at the pump to 132.8p in June and 0.7p dip in diesel to 135.6p. Food prices edged 0.1pc lower.
The ONS said the biggest fall within food came from meat prices, which fell 0.5pc, with reports that the recent washout weather had hit demand for barbecue foods.
The largest upward effect on prices came from recreation and culture, in which the price of digital cameras fell at a slower rate than last year. Alternative measures of inflation also fell, as the retail price index fell to 2.8pc in June, from 3.1pc in May.
Vicky Redwood, economist at Capital Economics, said the drop in inflation was a "pleasant surprise". "Admittedly, this was driven by a sharp drop in clothing inflation, which is probably a temporary result of the poor weather denting clothing sales," she said.
"Nonetheless, we think that evidence is tentatively building that weak activity and large amounts of spare capacity are bearing down on underlying price pressures."
In a sign that pipeline inflation pressures were also easing, British factory gate inflation hit its lowest since October 2009 in June on the back of lower oil prices.
Shop price inflation also slowed last month, as weak demand pushed retailers to offer deep discounts, according to a survey.
Britain's economy entered a technical recession in the first quarter of the year as gross domestic product declined 0.2%, following a 0.3pc drop in the final quarter of 2011.
telegraph.co.uk
No comments:
Post a Comment