The UK’s inflation rate, as measured by Consumer Prices Index (CPI), rose to 0.1% in May, having been at -0.1% in the previous month.
April’s CPI figure was the first instance of negative inflation since 1960, but the return to a positive rate assuages any fears that the UK could face a period of deflation. Howard Archer, chief UK and European economist at IHS Global Insight, observed that negative inflation had “proved both marginal and fleeting” and said: “We doubt that deflation will recur in the UK, although it cannot be completely ruled out if oil prices take a renewed appreciable downward lurch”.
The CPI rate’s fall in April and subsequent slight increase in May have both been largely attributed to air and sea travel fares.
Philip Gooding of the Office for National Statistics (ONS) said: “Last month CPI turned negative, mainly because of falling transport fares due to the timing of Easter. This month, that fall has been reversed.” He added that the falls in food and fuel costs over the past year “have eased this month, helping to push inflation up.”
The Bank of England governor Mark Carney has said that he expects inflation to remain at near-zero in the short term, and that this will help the UK economy by boosting the spending power of households.
Chancellor George Osborne said that “a powerful mix of low prices and rising wages [was] good news for working people and family budgets.” But added: “Of course the job is not done and we will continue to remain vigilant to all risks, particularly when the global economic situation is so uncertain.”