UK inflation drops to lowest since 2016 as coronavirus hits

[LONDON] Britain's inflation rate sank in April to its lowest since August 2016 as the coronavirus pandemic pushed down global oil prices and clothing retailers cut prices, while power tariffs also slid.

The consumer price index (CPI) dropped to an annual rate of 0.8 per cent in April from 1.5 per cent in March, official data showed on Wednesday, broadly in line with economists' expectations in a Reuters poll.

Consumer prices fell by 0.2 per cent in April alone.

The Bank of England (BoE) says inflation could fall below 1 per cent in the next few months. BoE Deputy Governor Ben Broadbent said it might go below zero around the end of 2020 although he did not think that would mark the start of a long period of deflation.

The Office for National Statistics (ONS), which produces the CPI, said earlier this month that inflation readings were likely to be volatile because the coronavirus shutdown has prevented statisticians from getting prices on a wide range of items.

Falls in the cost of household energy bills, transport - which includes petrol - as well as clothing and footwear, gave the biggest hit to prices.

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The ONS said clothing retailers, hit by the government's stay-at-home orders for most people in Britain, resorted to more discount sales than usual to try to shift their stock.

But there was upward pressure from the price of video games and consoles, board games and children's toys, as well as fresh vegetables, the ONS said.

"Falling petrol and diesel prices, combined with changes to the domestic energy price cap were the main reasons for lower inflation in April," ONS deputy national statistician Jonathan Athow said.

Core inflation, which excludes energy, food, alcohol and tobacco, held broadly steady at an annual rate of 1.5 per cent.

Retail price inflation - an older measure of inflation which the ONS says is inaccurate, but is widely used in bond markets and for other commercial contracts - dropped to 1.5 per cent from 2.6 per cent.

REUTERS