The Consumer Price Index has fallen for the third successive month. Falling by more than expected it dropped by 0.4% to 2.4% in June down from 2.8% in May. Retail Price Index is also down falling to 2.8% in June down from 3.1% in May a fall of 0.3%.
The fall in CPI was driven by a record May-to-June decline in clothing and footwear prices, which the ONS said was more typical of the June-to-July period, reflecting earlier than average seasonal discounting. Inflation has fallen from 5.2% last September due to the waning impact of the VAT hike at the start of 2011, falling energy, food and commodity prices, and a number of bill cuts from utility providers. Inflation is now within 0.5 percentage points of the Government's 2% target.
Last month's drop will add weight to the Bank of England's decision earlier this month to pump more emergency cash into the economy through its quantitative easing programme. The steeper-than-expected fall is also likely to raise the likelihood of further emergency support later this year as the UK struggles with weak growth.
Economic Secretary to the Treasury Chloe Smith reacted the news saying: "Inflation more than halved since September, meaning less pressure on family budgets and support for high-street spending. This lower inflation should support high street spending and growth in the economy in the months to come."
Labour's Shadow Treasury Spokesman, Catherine McKinnell, said in response to today’s inflation figures: "This fall in the inflation rate is welcome as last year’s VAT rise continues to drop out of the figures. But families and pensioners are still facing a real squeeze on their incomes because of this Government’s policies. People on low and middle incomes are paying a heavy price for this Government’s unfair choices and for failed economic policies which have pushed us into a double-dip recession."