INFLATION hit the brakes in June, as falling oil prices and high street discounting dragged consumer price growth to the slowest pace since December 2009, according to data released yesterday by the Office for National Statistics (ONS).
CPI grew 2.4 per cent in the year to June, approaching the Bank of England’s two per cent target and down from 2.8 per cent in the year to May. The Tax and Prices Index, which takes into account the effects of taxes, rose 2.3 per cent in the year, from 2.6 per cent in May.
“The sharp decline in oil prices and its feed through to prices at the pump are clearly having a major impact, but that’s not the whole story,” said Andrew Goodwin at Ernst & Young’s Item club.
“Weak demand, no doubt partly due to the bad weather, has forced retailers to discount earlier and more heavily than normal, particularly in the clothing sector,” he added.
Clothing contributed nearly 0.2 per cent to the 0.4 per cent lower rate, as prices dived 4.2 per cent on the month – the biggest fall June has seen since records began. ONS statisticians were unsure whether this was an earlier arrival of usual July sales – the proportion of sale items in the mix had increased – or whether July would see further falls.
Transport contributed 0.13 per cent to the drop, as the continuing oil price adjustment drove dips in fuel prices; compared to May petrol was 4.3p cheaper per litre while diesel was 4.7p cheaper. MoneySupermarket pointed to the benefits for savers, who, if they were basic rate taxpayers, only had to find a three per cent return on their money to gain real benefits. Those paying the higher rate needed four per cent and those paying 50 per cent needed 4.8 per cent.