Inflation has been remarkably steady at 2.7% or 2.8% in recent months so the drop in April to 2.4% was a surprise, and a very welcome one. Lower petrol prices and air fares contributed most to the fall, which reduced inflation to its lowest since September.
As Sir Mervyn King prepares to hang up his governor’s boots, inflation is now agonisingly close to target. It may head up a bit in the short-term, but not by enough to force Mark Carney, his successor, to have to write a public letter of explanation to the chancellor.
Other measures of consumer inflation also dropped. The new CPIH measure, including owner-occupiers’ housing costs, had inflation down from 2.6% to 2.2%. RPI inflation fell from 3.3% to 2.9%, while RPIJ (don’t ask) came down from 2.7% to 2.3%. More here.
There was also good news on so-called pipeline inflation pressures. Output prices rose by only 1.1% in the 12 months to April, down from 1.9% in March, while core output price inflation dropped from 1.3% to 0.8%. Input prices, fell by 0.1% over the 12 months to April – in March they were up 0.8%. More here.
The only price strength, interestingly, was in house prices, up 2.7% in the 12 months to March, from 1.9% in February, as detailed here.
This piece is cross-posted from David Smith’s Economics UK with permission.