Inflation registers surprise April fall

 

The annual rate of inflation eased to 2.4 per cent last month, thanks to falls in petrol prices and air fares, the Office for National Statistics reported yesterday.

The drop from the 2.8 per cent inflation rate recorded in March was larger than most City analysts had expected and represents the first moderation in consumer prices index growth since last autumn.

Petrol prices fell by 2.1p per litre on the previous month as crude oil costs dropped and supermarkets cut prices. This contrasted with a 3.2p rise on the same month a year earlier. Air fares were 6.4 per cent cheaper in April than March, following a rise of 7.4 per cent between the same months in 2012.

The easing of the pressure on the cost of living was hailed by the Treasury. "This is good news for families and businesses," a spokesman said.

But City analysts warned that the fall could be a blip rather than a trend and predicted that inflation would soon start rising again thanks to sharp declines in fuel prices that were registered in May and June 2012.

"This is likely to represent the calm before the storm," said Andrew Goodwin, senior economic adviser to the Ernst & Young Item Club. The Bank of England last week projected that inflation would peak at around 3 per cent later this year and would not fall to its official 2 per cent target until 2015.

Nevertheless, the ONS figures showed that core inflation – a measure that strips out volatile items such as energy, food and alcohol – eased from 2.4 per cent to 2 per cent in April. That could make it easier for the Bank of England's Monetary Policy Committee to enact more monetary stimulus in the coming months to support growth.

Victoria Clarke, of Investec, said the figures were "helpful" for the incoming governor. "We continue to judge that Mark Carney will wish to push for 'escape velocity' and that the committee will back him in this questm" she said.

The better-than-expected inflation figures put pressure on sterling, with the pound falling to $1.5165 yesterday.

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