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Consumer price inflation continues to slide

Consumer price inflation continues to slide

Consumer price inflation (CPI) continued its nine month slide in March falling from 1.7% to 1.6% over the month, the lowest figure since 2009.

The steady falls have come as some pricing power returned to workers, with wage inflation finally beginning to restore some of the consumer spending power which has been eroded since 2008.

The most recent wage data, for January, showed earned income rising at 1.7%, and is likely to have continued to strengthen since.

‘At last, the outlook for real wages has begun to brighten,’ said Paul Ashworth of Capital Economics.

‘Rising real pay should dispel fears both that the recovery may soon fizzle out and more deep-seated concerns that the link between economic growth and rising living standards has been severed.’

The rate of inflation has consistently undershot the Bank of England’s 2% inflation target since the end of last year.  Producer price inflation of 0.5% showed weak pressure across the supply chain.  

‘If anything, deflation could [now] be more of a threat than inflation,’ said Ben Bretell, economics editor at Hargreaves Lansdown. ‘There is even an outside chance of further quantitative easing, though this looks unlikely unless we see further sharp falls in inflation over the coming months.’

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