Last orders for low inflation?

For the last two years or so, UK households have been in the midst of what has been dubbed a consumer sweet spot – low inflation aided by a sustained period of falling food, fuel and petrol prices. But times are changing. The significant fall in the value of the pound has started to fuel import price inflation – while exporters benefit from a weak pound, it is worth remembering we import more than we export. But it will be well into 2017 before we see the main impact of sterling’s depreciation on consumer prices. Continue reading

Petrol Head Index

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It probably hasn’t been a great year for Jeremy Clarkson. But can the same be said for petrol heads as a whole? Whilst consumers in general have been benefiting from falling food, clothing and energy prices, what has been happening to fuel, car, and auto part costs? With the hotly anticipated new series of Top Gear set to get underway, I thought it would be worth taking a peak under the bonnet.

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UK CPI dips into deflation territory for first time since 1960

Last month UK CPI inflation dipped into deflation territory for the first time since March 1960. Following two months of no inflation (0.0% y/y) in February and March, consumer prices fell marginally by 0.1% y/y in April. Whilst technically this represents deflation, it is not the same phenomenon that blighted the Japanese economy in its lost decades or that occurred during the 1930s depression.  In these instances, sustained periods of falling prices were economically damaging as consumers were deterred from purchasing goods as prices would fall in the future.

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UK CPI flat lines in February

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Another month, another record low in consumer price inflation. January saw the annual rate of UK consumer price inflation (CPI) ease to a record low of 0.3%. This morning’s figures for February have revealed that UK consumer prices were unchanged over the last 12 months. However, the headline rate conceals diverging inflationary trends when looking at the price of goods and services. Within these two categories, it is a case of goods deflation (falling prices) and inflation (rising prices) for services.

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Inflation cools with CPI set to go sub-zero

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Last month UK consumer prices posted their lowest reading on record with an annual rise of just 0.3%. This compared with the 0.5% year-on-year rise in December. Households will welcome the latest falls in food and energy prices. Food prices fell by 2.7% y/y in January.  This represents the steepest annual decline in food prices since the monthly CPI series began in January 1997. UK food prices are now at their lowest level since November 2012 and have fallen by 3.1% since February last year. Meanwhile, Transport Fuels & Lubricants (petrol and diesel) recorded a record annual decline of 16.2% last month with prices down almost 23% since their April 2012 peak.  Outside of motoring costs, household utility bills fell last month by 2% year-on-year.

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