David Cameron's feelgood election as inflation hits record low,UK Election campaign, , UK election News updates, United Kingdom general polls, UK Election news 2015
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- Last Updated: Monday, 20 April 2015 18:16
David Cameron's feelgood election as inflation hits record low
David Cameron boasted of a feelgood election today as tumbling food and petrol prices hauled inflation down to a record low of just 0.3 per cent.
In a speech in Hove, outlining how the Tories would follow up the current government’s economic strategy, he said: “This is a plan to be felt in people’s pockets and homes and hearts and hopes.”
The January figure for the Consumer Prices Index was the lowest since the current measure began a quarter of a century ago. It cheered homeowners by pushing back the threat of higher interest rates, and also held out the prospect of wages rising faster than prices throughout the poll campaign.
In an earlier tweet, Mr Cameron said it heralded “security for hardworking taxpayers and their families”.
Howard Archer, chief economist at IHS Global Insight, added: “This bodes very well for consumer spending over the coming months.”
Much of the fall in the CPI — from 0.5 per cent in December — was driven by fuel costs and a supermarket price war, said the Office for National Statistics. The scene is now set for temporary deflation this spring, for the first time since March 1960. Experts say they do not fear a deflationary spiral of the type that dragged down the Japanese economy, however, since prices are likely to bounce upwards again next year.
However, Labour Treasury spokesman Cathy Jamieson said the real picture was of sluggish earnings rather than a UK success story. “A few months of falling world oil prices won’t solve the deep-seated problems in our economy,” she added.
Drivers enjoyed the cheapest average petrol prices since November 2009 — 108.3p a litre — after an 8.5p fall in January alone. Petrol prices have dropped more than 16 per cent since January 2014, in the wake of tumbling global oil prices since last summer.
Food is also dragging down inflation, as a bitter supermarket price war cuts the cost of milk and a range of staples, lowering the weekly shopping bill.
Recent price cuts by gas and electricity suppliers are also expected to feed through, pushing the CPI inflation rate into negative territory for the first time ever in the months ahead.
Rob Wood, chief economist at Berenberg, said: “For years British consumers have struggled with the squeeze from rising food, fuel and electricity prices.
Now that process has gone into reverse the UK household is left with more money to spend elsewhere, which should put the zip back in the recovery this year. The UK is a net oil and food importer so these price falls really are just like a tax cut, the opposite of the painful VAT rises of previous years.”
Bank of England Governor Mark Carney has called low inflation “unambig-uously positive” at a time when average wages are growing at 1.8 per cent, according to latest official figures — giving Britons a real-terms pay rise for the first time since the financial crisis.
Lower than expected inflation eases pressure on the Bank to hike interest rates for the first time since 2007. Citigroup Inc economist Michael Saunders said homeowners would probably escape a rate rise this year. “We still pencil in the first rate hike for early 2016,” he added.