The prices of goods in British shops are rising at the slowest rate in over two and a half years, official figures revealed today.
Inflation is slowing because of lower prices for food and fuel and early summer sales for clothing and footwear.
The Office for National Statistics has announced that the annual inflation rate as measured by the Consumer Prices Index (CPI) fell to 2.4% in June, down from 2.8% in May. This is the third month in a row that the annual rate has fallen.
The Retail Prices Index (RPI), which includes housing costs, dropped to 2.8% in June from 3.1% May.
June’s CPI inflation figure is the lowest rate recorded since November 2009, when it was 1.9%. CPI inflation has gradually fallen from a peak of 5.2% in September 2011 due to lower energy, food and commodity prices and a lessening impact from the VAT increase at the start of 2011.
Between May and June the Consumer Prices Index fell 0.4%, the largest fall in prices between these two months since the CPI index was launched in 1996.
The most significant contributor to the fall from May was clothing and footwear, which was 4.2% lower, although the price of football shirts was identified as “a notable exception” to this downward trend because of the Euro 2012 championship.
Household budgets are likely to benefit from prices in the transport category declining by 0.5% between May and June. Petrol prices were down GBP0.043 per litre on the month to stand at GBP1.33 per litre and diesel prices dropped GBP0.047 per litre to GBP1.39 per litre.
Neil Saunders, a retail analyst at retail research agency and consulting firm Conlumino, quoted by the BBC, said that household finances will continue to be squeezed because people’s wages are still rising more slowly than prices.
“However, if inflation continues to drop back at this pace, wage settlements will outstrip inflationary growth by the fourth quarter meaning we will see a return to growth in real disposable income,” he added.