Factory gate prices recorded an annual fall of 1.8 percent, matching the record decline seen in January, and British manufacturers’ crude oil costs have fallen by 47.7 percent compared with a year earlier.
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Economists say that the relatively strong pound will also have helped keep the price of imported food low and that there may also have been some downward pressure on inflation from summer clothing discounts last month.
Meanwhile, a category including electricity and gas fuels fell 3.5%, its biggest drop since March 2010, partly due to the effect of recent household gas price cuts, although the late=st have yet to feed through.
The sustained fall in wholesale prices could fuel concerns that the South Asian economy faces a deflationary threat even though consumer prices are rising.
Today the United Kingdom inflation rate fell back to zero, down from July’s rate of 0.1%, and the CPI rate has been nearly completely flat for the past seven months.
Force on prices are set to stay down for the next months, alongside with the predictions of the BOE that the rate of the inflation will remain near zero following the dip in a negative domain.
“At the same time, with inflation forecasts for next year sliding, the Bank is under no pressure to hike rates”. CPI was minus 0.1% in April and was last lower than that, according to experimental data, in March 1960 at minus 0.6%.
Wholesale prices, another inflation gauge, are expected to have fallen for a 10th straight month, tumbling 4.40 percent on-year compared with a 4.05 percent fall in July. Inflation has been below the Bank of England’s 2% target for the past 20 months.
Services inflation, a proxy for domestic price growth, slowed marginally to 2.3 percent in August from a four-month high of 2.4 percent in July.
Arvind Panagariya, a top policy adviser to the government, said last week said the economy needed 50-100 bps of rate cuts.
However, Currie urged clients to distinguish between disinflation – a slowdown in the rate of inflation; and deflation – a persistent and ongoing fall in prices.
The government too is in favour of interest cut as inflation is low.
However, among other protein rich items such as meat and fish, the rate of price rise was slower at 5.79 per cent.
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Low inflation has been a boon for consumers, who have enjoyed greater spending power amid falling food and transport costs.
