Retail Price Index hits record low
May 20 2009 By Iain Laing, The Journal
EASING pressure on households from lower utility bills and food costs caused a further fall in inflation last month.
The wider Retail Prices Index measure, which also includes mortgage interest costs and house prices, fell to a record minus 1.2% during the month – the lowest since ONS records began in 1948.
Experts predict the current deflation seen in the RPI will be temporary – peaking in September before moving back to positive territory as 2008’s steep rate cuts are not matched this year, creating inflationary pressure.
This should help avert a wider deflationary spiral, which would cripple a recovery as the economy wallows in a vicious circle of falling prices, wages and investment.
The Consumer Prices Index (CPI) – the inflation benchmark watched by the Bank of England – slid to 2.3% from 2.9% in April, the Office for National Statistics (ONS) said. CPI, which does not include mortgage interest payments or house prices, is now falling steadily back towards the Bank’s 2% inflation target but is set to slide below it later this year.
April’s fall comes after cuts in gas and electricity bills from energy suppliers compared with rises a year ago, water bills which rose at a slower rate than 12 months earlier, as well as lower rental costs.
