Belfast Telegraph

UK Website Of The Year

Tumbling food prices send cost of living to 55-year low

By Margaret Canning

Published 20/05/2015

Food prices are falling at unprecedented rates for consumers after inflation turned negative for the first time in more than 50 years during April
Food prices are falling at unprecedented rates for consumers after inflation turned negative for the first time in more than 50 years during April

Prices for many goods in Northern Ireland are at their lowest since Sir Basil Brooke was Prime Minister after the consumer price index (CPI) measure of inflation dipped to -1%.

Food prices are falling at unprecedented rates for consumers after inflation turned negative for the first time in more than 50 years during April.

They fell 3% year-on-year in April, the fourth month of deflation at around that level - an unprecedented run of prices falling at such a pace in the sector.

Core inflation, excluding volatile energy, food, alcohol and tobacco prices, was also subdued. At 0.8% in April, it was at its lowest level since March 2001.

Estimates of past CPI rates suggest it was last negative in March 1960, when Sir Basil Brooke was Prime Minister of Northern Ireland, Harold Macmillan was in Number 10 and Dwight Eisenhower was in the White House.

The figure of -0.1% is in line with projections by the Bank of England in its quarterly inflation report last week.

Fuel prices rose in the month, with a litre of petrol 2p more expensive than in March, meaning its downward pull on the year-on-year rate was smaller than before.

But the timing of Easter dragged down on CPI as air and sea fare rises in April were much lower than during the same month last year.

Danske Bank chief economist Angela McGowan said the deflationary figure was no surprise.

"The downward pressure in the UK's inflation rate has come from cheaper oil and food prices combined with the strong pound, which works to make imports less expensive," she added.

"This is, of course, good news for the consumer as the money in their pockets goes that bit further.

"But central banks do not like negative inflation rates as they worry that households will hold back on their spending as they anticipate things will get even cheaper. However, that is not likely to happen."

Ulster Bank chief economist Richard Ramsey said the current deflation was not a cause for panic and could not be compared with other examples of extreme deflation, such as the deflation which blighted the Japanese economy in the 1990s and 2000s.

"In these instances, sustained periods of falling prices were economically damaging as consumers were deterred from purchasing goods as prices would fall in the future," he added.

"Last month's first annual fall in consumer prices in 55 years conceals different price movements between consumer goods and consumer services.

"Goods prices have fallen by 2% in the 12 months to April, whereas the price of consumer services has risen by the same amount.

"The fall in consumer goods prices is due largely to falling commodity prices, notably food and energy prices.

"Food prices fell 3% year-on-year in April, while petrol prices were over 12% lower last month than the same period last year."

1960

The last time inflation dipped to -1%. But experts say the fall is in line with predictions

Belfast Telegraph

Your Comments

COMMENT RULES: Comments that are judged to be defamatory, abusive or in bad taste are not acceptable and contributors who consistently fall below certain criteria will be permanently blacklisted. The moderator will not enter into debate with individual contributors and the moderator’s decision is final. It is Belfast Telegraph policy to close comments on court cases, tribunals and active legal investigations. We may also close comments on articles which are being targeted for abuse. Problems with commenting? customercare@belfasttelegraph.co.uk

Read More

From Belfast Telegraph