ANNUAL UK inflation dropped to 1.5 per cent in March amid the developing coronavirus crisis – as petrol and clothing prices declined – and a leading think-tank predicted yesterday that it could tumble to just 0.5% this summer.
The fall in annual UK consumer prices index inflation to 1.5% in March, from 1.7% in February, was announced yesterday by the Office for National Statistics. This drop took annual CPI inflation further below the 2% target set for the Bank of England by the Treasury.
Howard Archer, chief economic adviser to the EY ITEM Club think-tank, said: “Inflation looks certain to fall back sharply over the coming months and we believe it could get as low as 0.5% over the summer. Sharply lower oil prices will bring inflation down, along with substantially weakened economic activity in the near term at least.”
He added: “The lockdown of the UK economy, reinforced by appreciable consumer concern over their jobs and pay despite Government support, will hugely weigh down on demand and likely exert downward pressure on prices despite the supply-side shock.”
Annual CPI inflation had dropped to 1.3% in December, its lowest since November 2016.
The ONS yesterday noted clothing and footwear prices had fallen 0.3% between February and March, in contrast to a rise of 1% between the same two months of last year.
It said: “Sales patterns this year are likely to have been influenced by the coronavirus (Covid-19) pandemic. Although prices were collected around March 17, before the formal Government lockdown was introduced on March 23, consumer behaviours and retailers’ expectations of that behaviour might have changed as a result of social distancing and other precautions.
READ MORE: Ian McConnell: This is why employers must do right thing at height of coronavirus crisis – and later
“A number of factors might have contributed to the change, including less browsing in physical stores, people spending more time at home where they might have been less interested in clothing, and a shift in spending patterns towards other necessities such as food and cleaning products.”
Petrol prices fell 5.1p-a-litre between February and March, compared with a rise of 1.2p a year earlier. The March fall is the sharpest month-on-month decline since December 2018.
Mr Archer said: “In the current highly challenging environment, any piece of helpful news on the economy is to be welcomed and a dip in inflation...is at least a modest positive for consumer purchasing power.”
News from trusted and credible sources is essential at all times, but especially now as the coronavirus pandemic impacts on all aspects of our lives. To make sure you stay informed during this difficult time our coverage of the crisis is free.
However, producing The Herald's unrivalled analysis, insight and opinion on a daily basis still costs money and, as our traditional revenue streams collapse, we need your support to sustain our quality journalism.
To help us get through this, we’re asking readers to take a digital subscription to The Herald. You can sign up now for just £2 for two months.
If you choose to sign up, we’ll offer a faster loading, advert-light experience – and deliver a digital version of the print product to your device every day. Click here to help The Herald: https://www.heraldscotland.com/subscribe/ Thank you, and stay safe.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here