Downward price changes in a variety UK consumer products have pushed inflation levels in May to its lowest in half a decade. According to latest reports detailing the UK’s consumer price index, a tool for measuring adjustments in cost of living, prices took a dip from its previous level of 1.8% the month before to 1.5% in May, matching the lowest set in October 2009.
Major players in the greater than expected decline in costs were supermarkets challenging each other for the attention of consumers with slashed prices and the now cheaper fares for air travel. This included the first ever decrease since 2006 in food and drinks excluding alcohol born from the discounts offered by supermarkets. For the year so far, food has gone down by 0.6% and for the month of May alone it went down by a greater margin of 1.1%. The opposite can be said of airlines which were helped by a surge in travelers during April’s Easter period. Their fares have fallen in price by 6% for the year with a smaller decrease of 3.2% in the single month of May.
Chancellor George Osborne responded to the updated numbers favorably, saying that smaller inflation is an indicator that their long term economic plan is starting to take hold. Likewise, low inflation should have a positive effect for the Bank of England as it gives the central bank less pressure to raise interest rates significantly earlier than they had originally planned.
Both the Trades Union Congress and the British Chambers of Commerce believe that hiking rates anytime this year would only put pressure on already struggling businesses. On the other hand, keeping rates at its current 0.5% level would result in benefits from investments.
Slow improvement in wages, however, have made the cheaper cost of goods still a burden for households in the UK. Wage growth in the European country have gone up by only 0.7%, including bonuses, significantly lagging behind the pace of inflation. These figures show that despite the strong performance of the UK economy, the benefits coming from it have yet to trickle down to individual citizens.
The material has been provided by InstaForex Company – www.instaforex.com
Downward price changes in a variety UK consumer products have pushed inflation levels in May to its lowest in half a decade. According to latest reports detailing the UK’s consumer price index, a tool for measuring adjustments in cost of living, prices took a dip from its previous level of 1.8% the month before to 1.5% in May, matching the lowest set in October 2009.
Major players in the greater than expected decline in costs were supermarkets challenging each other for the attention of consumers with slashed prices and the now cheaper fares for air travel. This included the first ever decrease since 2006 in food and drinks excluding alcohol born from the discounts offered by supermarkets. For the year so far, food has gone down by 0.6% and for the month of May alone it went down by a greater margin of 1.1%. The opposite can be said of airlines which were helped by a surge in travelers during April’s Easter period. Their fares have fallen in price by 6% for the year with a smaller decrease of 3.2% in the single month of May.
Chancellor George Osborne responded to the updated numbers favorably, saying that smaller inflation is an indicator that their long term economic plan is starting to take hold. Likewise, low inflation should have a positive effect for the Bank of England as it gives the central bank less pressure to raise interest rates significantly earlier than they had originally planned.
Both the Trades Union Congress and the British Chambers of Commerce believe that hiking rates anytime this year would only put pressure on already struggling businesses. On the other hand, keeping rates at its current 0.5% level would result in benefits from investments.
Slow improvement in wages, however, have made the cheaper cost of goods still a burden for households in the UK. Wage growth in the European country have gone up by only 0.7%, including bonuses, significantly lagging behind the pace of inflation. These figures show that despite the strong performance of the UK economy, the benefits coming from it have yet to trickle down to individual citizens.
The material has been provided by InstaForex Company – www.instaforex.com
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