Petrol price dip raises hopes for UK inflation rate

By DOMINIC JEFF
Published on 07/07/2012 00:00

Hopes that inflation will continue to fall were given a fresh boost yesterday with news that lower petrol costs were pushing down the cost of goods made in British factories.

The Office for National Statistics said prices charged by manufacturers fell 0.4 per cent between May and June – the biggest drop since November 2008.

Meanwhile, the prices manufacturers pay for goods fell 2.2 per cent, although this was slightly slower than the 2.6 per cent fall the previous month.

The figures fuelled hopes that inflation, which has already dropped to 2.8 per cent in May from 5.2 per cent in September, will head down further over the coming months, easing the squeeze on consumers. The Bank of England has used the fall in inflation to roll out fresh emergency measures to stimulate the UK’s struggling economy, saying it will create a further £50 billion in the next four months.

David Kern, chief economist at the British Chambers of Commerce, said falling inflation was now the most important single factor underpinning consumer demand in the UK in the face of tough fiscal austerity and problems in neighbouring economies. He urged policymakers not to risk further price rises by printing money.

“These figures indicate consumer price inflation is likely to continue falling, which will ease pressures facing businesses and individuals and boost consumer spending,” he said. “Nothing should be done to limit the fall in inflation.”

DOMINIC JEFF