UK inflation dropped more sharply than expected in June, providing an early boost to Andy Burnham's pledge to tackle the cost of living, though analysts cautioned the reprieve would be short-lived.
The consumer prices index fell to 2.6% from 2.8% in May, outstripping forecasts of 2.7%, the Office for National Statistics said. The decline was driven by lower prices at the pump, particularly diesel, and the slowest food price inflation in nearly two years, with staples such as margarine, sugar and chocolate becoming cheaper.
“UK inflation fell to 2.6% in June, beating forecasts, driven by lower fuel and food prices, but analysts warn rise is temporary.”
June's figure will be welcomed by the new prime minister, who has made reducing household bills a priority. He has already announced a winter VAT cut on electricity bills and a £2 cap on bus fares in England from January. Chancellor John Healey called the drop "news families want to hear" but added "there is much more to do to give people the breathing space they need".
The ONS said food products including chocolate, margarine and beef drove the slowdown. Grant Fitzner, the ONS chief economist, noted: "Clothing prices also fell with the start of summer sales, with bigger discounts than last year." The British Retail Consortium's Harvir Dhillon said the fall was spurred by "intense competition between supermarkets", but warned: "If retailers are to keep prices affordable for consumers in the long run, the government needs to take practical steps to lower the everyday cost of doing business."
However, analysts warned the improvement is likely temporary. The National Institute of Economic and Social Research expects inflation to worsen in the second half of the year, reflecting a 13% rise in the energy price cap from July and rising crude oil prices after a resumption of hostilities in the Middle East. Brent crude has climbed back above $90 a barrel this week.
Shadow chancellor Mel Stride blamed the government for inflation remaining above the Bank of England's 2% target, saying: "Labour's tax hikes and reckless borrowing stoked inflation, and Andy Burnham has already made billions of pounds of spending commitments without any plan to pay for them."