United Kingdom inflation drops to lowest since 2016 as coronavirus hits

Andrew Cummings
May 22, 2020

On Food Index it stated:"The composite food index rose by 15.03 percent in April 2020 compared to 14.98 percent in March 2020".

In April 2020, all-item inflation on a year-on-year basis was highest in Bauchi, Sokoto, and Plateau while Edo, Abuja, and Kwara recorded the slowest rise.

The new increase is 0.08% points higher than the 12.26% recorded in March 2020.

"The fall in the headline rate of CPI inflation in April to its lowest level since August 2016 primarily was due to a 0.6 percentage-point reduction in the contribution from energy prices", noted Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics.

The nationwide core consumer price index, or CPI - which includes oil costs but excludes volatile fresh food prices - fell 0.2% in April to 101.6, according to data released by the Ministry of Internal Affairs.

This is the highest Nigeria's inflation has risen since 12.48% was recorded in April 2018.

On a month-on-month basis, the core index was up by 13bps 0.93%.

But while low inflation reduces the need for rises in interest rates and gives people a feeling the pound in their pocket stretches further, it's possible to have too much of a good thing.

"Energy prices, which have a big impact on consumer prices, could fall further in the coming months when the effect of falling oil prices is mirrored in electricity and gas prices", a ministry official said. This should be expected in view of the border closure and increased demand for food on the back of COVID-19 lockdowns.

The Chief Executive Officer, Economic Associates, Dr Ayo Teriba, said Nigeria should be anxious about economic recovery rather than inflation. "Supply chain disruptions imply a loss of access to some markets, and consumers would likely pay more for goods and services".

And in a further sign of the impact of coronavirus on the United Kingdom economy, the ONS said clothing retailers resorted to heavy discounting to try to shift stock amid the lockdown.

Analysts are keeping a close watch on whether the price trend will be deflationary going forward, which would hit companies' profits and may add downward pressure on wages.

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