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Growth in UK consumer prices unexpectedly slowed in April 2016

Growth in UK consumer prices unexpectedly slowed in April 2016 for the first time since last September. The inflation outweigh the reduced prices of airfares and clothing, reaching a value of 0.3% yoy. For comparison, the inflation in March 2016 was 0.5% and the market expectations were the value to remain the same. On a monthly basis, the consumer prices in UK rose by 0.1% against expectations for growth of 0.3%. In March, the annual inflation rate was 0.5%, which is the highest level in over a year.

The core inflation, which excludes volatile prices of fuel and food, slowed more than expected from 1.5% in March to 1.2% in April. The analysts predicted value of 1.4%. The main reason for the decline is the drop in air fares, which in March rose sharply due to the early Easter holidays. However, after five months a gradual rise in inflation there is slowdown in consumer prices.

In April, the airfares dropped by 14.2% and clothing by 0.4% on MoM. A month earlier, there was an acceleration of inflation, as seasonal promotions expired and this gave impetus to the prices of clothing. The tickets rose even, as Easter was earlier this year. Both effects weaken in April, so the growth in consumer prices slows.

Bank of England expects inflation to accelerate this year because of the weakened pound, which makes import prices higher and put under pressure the British business. The pound weakened by about 9% since November. Furthermore, since February the price of oil rose by around 75% from the bottom, which reached in February.

The central bank expects inflation to be 0.9% by the beginning of the fourth quarter this year and 1.3% in the first quarter of 2017. According to the regulator growth in consumer prices will reach the target level of 2% in the second quarter of 2018. These forecasts were made with the assumption that British citizens support staying in the European Union at the referendum in June.

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