uk inflation and growth forecasts both fall

In a great day for TLAs, CPI, RPI and the IMF’s forecast for UK GDP have all dropped dramatically.

uk inflation and growth forecasts both fall

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According to the Office of National Statistics, consumer price inflation reached 2.4% in June, down from 2.8% in the previous month. Prices are still rising, but after their third consecutively monthly drop, they are growing at their lowest rate since the end of 2009.

As Tom Stevenson, investment director at Fidelity Worldwide Investment, explained: “The faster than expected fall in CPI in June is good news for consumers, reducing the squeeze caused by prices rising consistently faster than still very subdued wage growth.

“With inflation heading rapidly back down to the Bank of England’s 2% target, the door is open for further quantitative easing later in the year if the economy continues to stagnate.”

RPI, including housing costs, dropped from 3.1% to 2.8%.

Stevenson went on to paint a less healthy picture as the drop in inflation may not be sustainable, particularly if food prices continue to rise as they have over the past month or so thanks to the US heatwave.

He added: “The oil price has also stabilised recently and the summer sales may simply have been brought forward to stimulate spending during the recent downpours. Inflation has been tamed but not defeated.”

Another knock to the future prospects of the UK’s GDP was the announcement a matter of hours before these inflation numbers were publicly announced, that the International Monetary Fund had cut its forecast for the UK’s economic growth from a rate three months ago of 0.8% to just 0.2% by the end of this year. The IMF’s prediction in June last year was for UK GDP growth in 2012 of 2.3%.

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