Continuing on the good news front, the Office for National Statistics
(ONS) has reported the Consumer Prices Index (CPI) and the Retail Prices Index
(RPI) inflation rates fell in June to 2.4% and 2.8% respectively.
This represents the slowest rate of increase in UK prices
since the latter half of 2009 and the third month in a row that the rate of
increase in CPI has fallen.
Reasons behind this decrease were a drop in clothing and
footwear costs - with a reduction of 4.2% seen in these sectors - probably due
to retailers bringing forward their summer sale promotions.
Whilst a drop in prices here was anticipated, due to
aggressive price reductions by those retailers, a fall of this scale was not
forecast.
We also saw a reduction in alcohol and transport costs,
which were down by 0.5% and food prices, particularly meat, down by 0.1%. The
ONS cited the lack of domestic barbecues, due to the inclement ‘summer’ weather
we have experienced as one reason for this decline.
Fuel costs were an important element of this overall
reduction, with petrol seeing a fall of 4.3 pence per litre, to an average
price of £1.33 a litre and diesel falling 4.7 pence to an average of £1.39 a
litre.
Echoing this good news, Neil Saunders, retail analyst at
Columino stated: “However, if inflation continues to drop back at this pace,
wage settlements will outstrip inflationary growth by the fourth quarter,
meaning we will see a return to growth in real disposable income.”
With regard to the reduction in fuel costs, he went on to
say: “This has benefited most households although, in our view, it will take
time for this to drive tangible changes in behaviour in terms of shopping and
spending habits.”
Representing a welcome continuing decline in inflationary
pressure and a move nearer to the Bank of England’s CPI target rate of 2%,
these latest figures will reassure the Bank that its Quantitative Easing (QE)
programme (totaling £375bn so far) has not stoked the inflationary fires in the
UK economy as some members of the bank’s Monetary Policy Committee
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