UK Inflation At 4-Year Low

UK inflation eased to a four-year low in May largely driven by lower costs for petrol and recreational and cultural goods, adding pressure on the central bank to ease monetary policy further.

Consumer price inflation eased to 0.5 percent in May, as expected, from 0.8 percent in April, the Office for National Statistics said Wednesday.

This was the lowest since June 2016, when a similar 0.5 percent was reported. The rate was last lower, at 0.3 percent in May 2016.

On a monthly basis, consumer prices remained unchanged after easing 0.2 percent in April. Prices were expected to drop 0.1 percent.

Core inflation came in at 1.2 percent, down from 1.4 percent in April and below the expected rate of 1.3 percent.

The consumer prices index including owner occupiers’ housing costs grew 0.7 percent annually in May, slower than the 0.9 percent increase in April.

The largest downward contributors for the annual inflation were transport, recreation and culture and clothing and footwear.

Another report from ONS showed that output prices fell 1.4 percent annually in May compared to a 0.7 percent decrease in April. This was the second consecutive month of negative change.

Output prices logged a monthly decrease of 0.3 percent, following a 0.8 percent fall in April.

Economists had forecast output prices to fall 0.9 percent annually and to rise 0.1 percent from April.

At the same time, input prices fell 10.0 percent from last year in May, up from negative 10.2 percent in April. This was the fourth consecutive month that the rate has been negative and bigger than the economists’ forecast of 6 percent drop.

Month-on-month, input prices advanced 0.3 percent in contrast to a record 5.5 percent fall in April. This was the first time the monthly rate has been positive since January. Prices were forecast to rise 4.5 percent.

Inflationary pressures are likely to remain fairly muted for the time being, given the slack in the labor market, James Smith, an ING economist, said. This, in turn, will keep the pressure on the Bank of England to maintain its current degree of stimulus, and a further GBP 150 billion of quantitative easing is expected to be unveiled this week.

Source: Read Full Article