Inflation falls in June

City A.M. Reporter
Inflation fell to its lowest in more than two and a half years in June helped by early summer sales of clothes and shoes, official data showed on Tuesday, suggesting consumers will be able to spend more and give a rare helping hand to the economy.

The Office for National Statistics said annual consumer price inflation dropped to 2.4 per cent from 2.8 per cent in May - the lowest since November 2009 - beating economists' forecasts for a steady reading.

The biggest downward contribution to the annual rate came from a fall in the prices of clothes and footwear, followed by slower inflation for transport and food.

The clear downward trend in inflation since it hit a three-year high of 5.2 per cent in September last year is likely to reassure the Bank of England that it was right to inject extra cash into the economy after it extended its asset-buying stimulus programme by 50 billion pounds on 5 July.

Core CPI, which excludes volatile food and fuel costs, dipped to 2.1 percent in June from 2.2 per cent in May.

In a sign that pipeline inflation pressures were also easing, British factory gate inflation hit its lowest since October 2009 in June on the back of lower oil prices.

Shop price inflation also slowed last month, as weak demand pushed retailers to offer deep discounts, according to a survey.