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Inflation drops to 1.9%

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The inflation rate has dropped to 1.9 per cent for the first time in four years which points towards a more positive outlook for retail.

The consumer price index (CPI) has now fallen for the seventh month in a row and is a welcome announcement for the Bank of England which set a 2 per cent inflation target.

Movements were driven by cheaper recreation and culture, furniture (-0.06%), household equipment (-0.05%) and alcohol and tobacco products (-0.05%).

If inflation continues to fall throughout 2014 it is likely wage growth will outpace it, resulting in workers having more purchasing power in the retail sector.

“Today’s fall in inflation is more evidence our long term economic plan is working”, David Cameron commented on Twitter. “We want to ensure a secure future for hard working people.”

David Kern, Chief Economist at the British Chambers of Commerce (BCC) said the fall in inflation was very good news for businesses and consumers.

“An economic environment of low inflation and low interest rates allows people and firms to plan ahead, as they can be confident they will not encounter any unwelcome surprises,” he said.

Neil Saunders, Managing Director of Conlumino said although prices increases are moderating now, there could be a “slight inflationary push” later in the year arising from the recent flooding which has already affected thousands of acres of farmland and could have a negative impact on UK food supply.

Published on Tuesday 18 February by Editorial Assistant

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