U.K. Inflation Slows; PPI Continues To Decline

U.K. inflation slowed unexpectedly in April on the weak air fares and clothing prices, and factory costs continued to decline due to a fall in petroleum product prices, official data showed Tuesday.

Inflation eased to 0.3 percent in April, data from the Office for National Statistics showed, while economists expected it to remain unchanged at a 15-month high of 0.5 percent seen in March.

Core inflation that excludes energy, food, alcoholic beverages and tobacco, slowed to 1.2 percent from 1.5 percent a month ago.

Month-on-month, consumer prices gained only 0.1 percent after rising 0.4 percent in March. Economists had forecast a 0.3 percent increase.

Air fares decreased 14.2 percent from March, reflecting the timing of Easter. There was also a smaller downward effect from purchase of vehicles, particularly second-hand cars.

April's fall in CPI inflation merely reflects erratic Easter effects unwinding and is unlikely to be the start of a renewed downward trend, Ruth Miller, an economist at Capital Economics, said.

In the Inflation Report, the Bank of England said inflation is projected to rise steadily over the following months, reaching 0.9 percent in September. According to the May report, prices will rise 0.4 percent in the second quarter of 2016.

IHS Global Insight economist Howard Archer noted that the inflation and growth outlook will likely be very different should the UK vote to leave the EU in June's referendum.

Another report showed that factory gate prices decreased 0.7 percent on a yearly basis in April versus a 0.9 percent drop in March and a 0.8 percent decline forecast by economists.

The producer price index has now seen negative movements on the year for 22 consecutive months.

Compared to March, output prices moved up 0.4 percent following a 0.3 percent rise. Prices have increased for the third straight month.

The annual decline in input prices came in at 6.5 percent compared to a 6.1 percent fall in March. The fall was slower than the expected decrease of 6.7 percent.

On a month basis, input prices gained 0.9 percent, but slower than March's 2.2 percent rise.

by RTT Staff Writer

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