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UK inflation continutes to fall

The consumer prices index (CPI) dropped to 4.8 per cent in November from 5.0 per cent in October.

The consumer prices index (CPI) dropped to 4.8 per cent in November from 5.0 per cent in October.

Amid supermarket price wars and retailer discounting, inflation continues to fall in November from a peak in September, being pushed down by food, clothing, furniture and petrol prices, according to official figures.

The Office for National Statistics measured the consumer prices index (CPI) dropping 0.2 points from October, as expected, to stand at 4.8 per cent in November.

A strong harvest eased the prices of food, which rose by much less than a year earlier. Bread and cereal prices eased and jam, chocolate and confectionary fell by a record. Good harvests for potatoes and onions caused vegetable prices to drop.

A 1p per litre fall in petrol prices also helped bring down inflation.

The broader retail prices index (RPI) fell 0.2 per cent in November, from 5.4 per cent in October.

The drop in inflation figures should come as a relief for policymakers at the Bank of England, who said in the November Inflation Report that price pressures would ease in the months to come.

Inflation is expected to drop further in early 2012, due to factors as January's VAT rise, which falls out of annual comparissons, and the waning impact of previous price increases in food and energy.

Falling inflation should ease the squeeze on consumer spending power- which also bolstered expectations that the Bank of England will extend its quantitative easing (QE) programme, pumping more electronic money into the economy- but economists say consumers will still face a big squeeze in incomes, which will affect them in the run up to the Christmas period.

The ONS inflation reading comes amid a wave of grim data on the UK economy. The OECD's leading indicator for the UK showed a further fall yesterday, which adds to fears of a double-dip recession and data due tomorrow is expected to show a further rise in unemployment.

"With consumer price inflation finally heading downwards and looking set to fall particularly sharply during the first half of 2012, it will become less awkward credibility wise for the Bank of England to undertake further stimulative action to boost the struggling economy," said Howard Archer, chief UK economist at IHS Global Insight.

"Of course, the Bank of England has been arguing for some time that consumer price inflation will fall back sharply once temporary upward pressures wane, but it will nevertheless be pleased to see the process apparently finally get underway."