UK inflation turns positive in May

Source: Dukascopy Bank SA
"Inflationary pressures remained limited in May and core inflation was still only 0.9% after hitting a 14-year low of 0.8% in April"
- Howard Archer, IHS Economics


British inflation turned positive again in May after sliding below zero in the preceding month for the first time in 55 years. Consumer prices rose 0.1% in May from a year earlier, following the 0.1% decline in April. Measured on a monthly basis, UK inflation edged higher 0.2%, according to the Office for National Statistics. An upward pressure on prices in May came from a rebound in air fares, which dragged down inflation in April on the different timing of the Easter holidays in 2015 and 2014. Fuel prices gained 1.9% in May from April, reflecting a recovery in global oil prices. Food prices also rose in monthly terms, up 0.1% from April for their first monthly gain since December. Core CPI, a less volatile gauge as it strips out energy and food prices, failed to meet market expectations of reaching 1% and instead accelerated a notch above April's figure to 0.9%. Bank of England Governor Mark Carney previously said inflation was likely to rebound as sharp plunge in global oil prices last year worked itself out of the figures, and that the UK was not threatened by a devastating period of deflation.

A separate report showed that factory gate prices declined by 1.6% in annual terms in May, the slowest drop since December of 2014 and in line with economists' predictions. Also, house prices growth slowed the most in 10 years in April, underscoring uncertainty May's national election and tax changes in Scotland. House prices climbed 5.5% in April, falling from 9.6% in the preceding month.


© Dukascopy Bank SA

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