UK Inflation Rate Slows for 1st Time in 7 Months


Consumer prices in the United Kingdom went up 0.3% yoy in April, slowing from a 15-month high of 0.5% in March and lower than market expectations of a 0.5% gain. It is the first drop in inflation rate since September as cost of air fares, vehicles, fuels and lubricants and electricity declined.

Year-on-year, transport prices declined at a faster 1.3 percent (-0.1 percent in March), cost of housing and utilities fell 0.1 percent (following a 0.4 percent gain in March) and cost of food and non-alcoholic beverages went down 2.5 percent (-2.7 percent in March). In addition, the inflation for clothing and footwear slowed (0.3 percent from 1.4 percent in March) and remained steady at 1 percent for miscellaneous goods and services. In contrast, cost of recreation and culture rebounded (0.4 percent from -0.2 percent in March), rising for the first time since January of 2015 and prices of restaurants and hotels grew at a faster 2.3 percent (2.1 percent in March), also the highest since January last year. 

On a monthly basis, consumer prices edged up 0.1 percent, slowing from a 0.4 percent rise in the previous month and the lowest since January. The main downward contribution came from transport prices (-0.1 percent), namely air transport, with prices falling by 14.2 percent and influenced by the timing of Easter, which contributed to a large increase in fares between February and March 2016, with a subsequent fall in April 2016. There was also a smaller downward effect from purchase of vehicles, particularly second-hand cars. These downward effects were partially offset by an upward contribution from motor fuels, with prices for both petrol and diesel rising by more than they did a year ago. In addition, prices of clothing and footwear fell 0.4 percent and cost of housing and utilities declined 0.2 percent, mainly due to social housing rent. This is likely to be due to changes that were announced in the Summer Budget 2015, in which social housing rent was set to decrease by 1 percent for the next 4 years, starting in April 2016. In contrast, the main upward contributions came from recreation and culture with prices rising 0.8 percent, mainly due to computer games and admission to cultural events.

The core index which excludes prices of energy, food, alcohol and tobacco remained flat on the month and gained 1.2 percent on the year. 

ONS | Joana Taborda | joana.taborda@tradingeconomics.com
5/17/2016 10:15:36 AM