Unexpected Drop in UK Inflation, Core Rates Surge

The UK’s consumer price inflation rate fell to 8.7% in April from 10.1% the previous month, according to figures released by the Office for National Statistics on Wednesday. While this was lower than expected, a measure of core inflation unexpectedly rose during this period.

This latest data suggests that while overall prices are continuing to fall due to weak demand and low energy costs, there is still an underlying pressure on certain goods and services, which could be attributed in part to Brexit-related supply shortages or higher import costs as a result of sterling’s devaluation since 2016 referendum vote.

Economists have suggested that although the headline figure has fallen below 9%, it may not stay at these levels for long given current economic conditions, such as rising unemployment and low wage growth which could lead households into further debt if they choose not to spend their savings from reduced prices elsewhere within the economy instead of saving them away for future use or investment purposes.

Overall, it appears that despite some welcome relief provided by falling prices across many sectors due to deflationary pressures caused by the Covid-19 pandemic, there is still considerable uncertainty about how much longer any respite will last before we start seeing signs of recovery later this year or early next year when restrictions begin easing up again.