UK inflation set to ease further

Hard-pressed UK households were offered fresh hope today after official figures suggested inflation will continue to ease.

The Office for National Statistics (ONS) revealed a 0.2% fall in the prices manufacturers charge between April and May, leading to the slowest annual rate of growth since November 2009.

AThe prices manufacturers pay for goods rose just 0.1% in the year to May - its lowest rate since September 2009 – as oil costs fell.

The ONS’s Producer Price Index, a closely watched indicator of inflation, provides further hope that consumer price index (CPI) inflation, which was at 3% in April, will continue to fall from its September peak of 5.2%.

This would help to ease the strain on households whose pay has failed to keep up with soaring prices.

The improving news on inflation comes as a Bank of England-backed survey showed that people last month expected inflation of 3.7% over the coming year, up from forecasts of 3.5% in the previous quarter.

Howard Archer, chief economist at HIS Global Insight, said: “The May producer price data are benign and boost hopes that consumer price inflation will head down appreciably further over the coming months.”