Inflation falls to 31-month low

Hillingdon Times: The consumer price index measure of inflation fell to two point four per cent in June The consumer price index measure of inflation fell to two point four per cent in June

The rate of inflation dropped to a 31-month low last month, official figures have shown, as record rainfall forced clothing retailers to bring forward their summer sales.

The consumer price index (CPI) rate of inflation fell to a lower-than-expected 2.4% in June, from 2.8% in May, the Office for National Statistics (ONS) said. City analysts had forecast the rate to drop to 2.7%.

The fall in CPI was driven by a record May-to-June decline in clothing and footwear prices, which the ONS said was more typical of the June-to-July period, reflecting earlier than average seasonal discounting.

Inflation has fallen from 5.2% last September due to the waning impact of the VAT hike at the start of 2011, falling energy, food and commodity prices, and a number of bill cuts from utility providers. Inflation is now within 0.5% of the Government's 2% target.

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."

Last month's drop will add weight to the Bank of England's decision earlier this month to pump more emergency cash into the economy through its quantitative easing programme. The steeper-than-expected fall is also likely to raise the likelihood of further emergency support later this year as the UK struggles with weak growth.

Britain's economy entered a technical recession in the first quarter of the year as gross domestic product declined 0.2%, following a 0.3% drop in the final quarter of 2011.

The overall rate was also driven down by transport prices, which dropped 0.5% as petrol and diesel prices continued to fall. Consumers also benefited from lower fuel prices, as the price of petrol at the pump fell by 4.3p to 132.8p in June and diesel dipped by 0.7p to 135.6p.

Food also helped pull down the overall rate as prices edged 0.1% lower. The ONS said the biggest fall within food came from meat prices, which fell 0.5%, with reports that the recent washout weather had hit demand for barbecue foods.

Vicky Redwood, economist at Capital Economics, said the drop in inflation was a "pleasant surprise".

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