UK inflation drop in April bigger than expected

Tuesday 21 May 2013 10.53
Lower UK petrol prices push inflation rate lower
Lower UK petrol prices push inflation rate lower

Falling prices at the petrol pumps in the UK led to a bigger-than-expected drop in inflation in April, the first easing in the annual rate of price rises for six months.

The Office for National Statistics (ONS) said UK consumer prices index inflation dipped to 2.4% in April, from 2.8% in March.

Lower fuel costs and air fares pushed overall transport prices down for the first time in almost four years.

But the temporary dip in inflation triggered by weaker commodity prices will do little to ease the financial pain on households, with inflation expected to spike above 3% in the summer.

The pace of the fall surprised economists, who had expected CPI inflation to edge down to about 2.7% in April. They said that April's marked drop in inflation to a seven-month low of 2.4% is very welcome news, providing significant relief for both consumers and the Bank of England.

Plunging global commodity markets have hit the price of Brent crude oil in recent weeks, driving petrol and diesel costs lower.

UK petrol prices fell by 2.1 pence over the month to 136.4 pence a litre compared with a 3.2 pence rise a year earlier. Diesel was 3.9 pence lower to 141.7 pence per litre, compared with a 2.1 pence rise a year ago.

Air fares fell by 6.4% on a month earlier, compared with a rise of 7.4% a year earlier.

The only notable upward effect came from food and non-alcoholic drinks. Prices rose by 0.7% on the month, compared with a 0.1% fall a year earlier, as farmers pushed through price rises after the freezing winter ruined crops.

The UK's CPI inflation fell for the first time since last autumn, but is expected to provide only a temporary respite for households as rising gas, water and electricity bills feed through to households over the summer.

At 2.4%, it far outstrips wage rises which grew at just 0.4% in the first quarter versus a year earlier. Inflation has remained stubbornly above the Bank of England's 2% target since December 2009.