Britain exits deflation after just one month as prices rise 0.1% in May

 
Inflation returns: Prices faced by households have risen by 0.1% over the last year (Picture: Rui Vieira, PA)
PA
Clare Hutchison16 June 2015

Britain's fall into deflation has lasted just one month, as new data showed today that prices rose again in May.

A widely-expected slip into deflation occurred for the first time in 55 years in April, when prices fell by 0.1% on the back of lower transport costs.

But the Office for National Statistics said the consumer price index - the main measure of inflation - was back on positive ground in May, rising 0.1%.

Transportation costs were again behind the movement, particularly higher air fares due to the timing of Easter. A 2.5p per litre rise in petrol prices and increasing food costs also played a part, the ONS said.

The agency said, however, that looking longer term, prices for food and fuel are still lower than they were a year ago, which is pulling the rate of inflation down.

"Decreases in the price of oil, lower commodity prices and increased competition among the supermarkets are all possible contributing factors," the ONS said.

Ian Stewart, chief economist at Deloitte said: "The big picture is of very weak price pressures. Inflation is unlikely to rise significantly above the zero mark for the rest this year.

"Even stripping out the effects of big declines in energy and food prices, so-called core inflation is not far off a 15-year low."

"With inflation likely to stay below [the Bank of England's] 2.0% target until 2017, the Bank of England can afford to take its time before raising interest rates. UK consumers will continue to benefit from very weak price pressures and ultra-low interest for some time yet."

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