The annual CPI figures for the UK showed a fall from 3.5% in March 2012 to 3.0% in April, the lowest for 2 years. The ONS reports that subdued alcohol and clothing prices contributed most to the downward pressure on the price level, with prices of household goods and no alcoholic beverages actually falling during April. Hotel costs, rents and restaurant prices showed the greatest upward pressure.
This represents the first month in the last 10 that the Governor of the Bank of England, Sir Mervin King, has not had to write an open letter to the Chancellor explaining what inflation has not been within its target range of 2% +/- 1%. Clearly, some of the global cost shocks that pushed up the CPI over the last 12 months have worked their way out of the system, and the weakness of demand is now showing up in the inflation data. A rain-swept UK, which produced some poor retail figures, also had a downward effect on consumer prices as retailers were forced to discount prices to attract customers.