Advertisement

Inflation falls back to zero

This year, inflation has flatlined – and don't expect it to pick up anytime soon.

The annual rate of consumer price inflation (CPI) slipped back to zero in August from 0.1% in July. Core inflation, excluding volatile food and energy prices, declined from 1.2% to 1%. A fall in petrol prices and a reversal of the recent uptick in clothing prices were responsible for the moves. The unemployment rate edged back down to its post-crisis low of 5.5% in July.

What the commentators said

This period of "noflation" bodes well for growth, as it should stimulate consumption, said Scott Corfe of the Centre for Economic and Business Research. The cost of essentials is declining at the same time as wage growth is accelerating. The recovery in pay "has been the missing element" in the economic rebound, but it now seems to have arrived, said Chris Williamson of Markit. Pay excluding bonuses grew by 3.2% year-on-year in July, the biggest rise since November 2008.

Advertisement - Article continues below

This sort of increase "would normally worry policymakers into a pre-emptive hike in interest rates to avoid upward wage pressures feeding through into higher inflation", said Williamson. The Bank of England will remain "ultra-cautious" about raising interest rates, given recent signs of slower job creation, the absence of inflation and jitters in overseas markets. But now a hike by the end of 2015 is "a distinct possibility".

Advertisement
Advertisement

Recommended

Visit/516758/beyond-the-brexit-talk-the-british-economy-isnt-doing-too-badly
Economy

Beyond the Brexit talk, the British economy isn’t doing too badly

The political Brexit pantomime aside, Britain is in pretty good shape. With near-record employment, strong wage growth and modest inflation, there is …
17 Oct 2019
Visit/economy/uk-economy/601589/boris-johnsons-grand-infrastructure-plan-needs-some-small-print
UK Economy

Boris Johnson’s grand infrastructure plan needs some small print

Grand infrastructure projects are all very well, but it is the small stuff that delivers the big returns, says Matthew Lynn.
5 Jul 2020
Visit/economy/uk-economy/601605/spend-spend-spend-think-of-it-as-your-patriotic-duty
UK Economy

Spend, spend, spend – think of it as your patriotic duty

After months of lockdown, many of us will have some money to spare. If you do, says Merryn Somerset Webb, spend it.
2 Jul 2020
Visit/investments/property/601606/house-prices-crash-uk-property-prices-falling-where-next
Property

House price crash: UK property prices are falling – so where next?

With UK property prices falling for the first time in eight years, are we about to see a house price crash? John Stepek looks at what’s behind the sli…
2 Jul 2020

Most Popular

Visit/investments/property/601606/house-prices-crash-uk-property-prices-falling-where-next
Property

House price crash: UK property prices are falling – so where next?

With UK property prices falling for the first time in eight years, are we about to see a house price crash? John Stepek looks at what’s behind the sli…
2 Jul 2020
Visit/economy/inflation/601584/the-end-of-the-bond-bull-market-and-the-return-of-inflation
Inflation

The end of the bond bull market and the return of inflation

Central bank stimulus, surging post-lockdown demand and the end of the 40-year bond bull market. It all points to inflation, says John Stepek. Here’s …
30 Jun 2020
Visit/investments/investment-strategy/601567/have-small-companies-lost-their-edge
Sponsored

Have small companies lost their edge?

SPONSORED CONTENT – The tectonic plates beneath the modern investing landscape appear to have started moving in new directions
26 Jun 2020