-Adds comments from Treasury Minister Chloe Smith to version first sent
0933BST
-June CPI -0.4% m/m; +2.4% y/y vs May 2.8% y/y; Below Median Forecast

LONDON (MNI) – Consumer price inflation fell sharply in June,
coming in way below the latest Bank of England forecast, as clothing and
footwear prices fell at a record pace on the month, figures from
National Statistics showed Tuesday.

This is the third month in a row that the CPI has come in below
expectations, a reversal of the situation seen in the past few years.
Moreover, for the second quarter inflation fell to just 2.7%,
significantly below the May Inflation Report forecast of 3.19%.

While part of the decline may be due to timing effects of the
summer sales, the latest drop should help to assuage fears that
inflation could be sticky coming down.

Chloe Smith, the Economic Secretary to the Treasury, suggested
that weaker inflation could be a help to consumer spending, something
which the Bank of England has mentioned previously as well.

“Inflation has more than halved since September, meaning a little
less pressure on family budgets. This lower inflation should support
high-street spending and growth in the economy in the months to come,”
she said

Consumer prices fell 0.4% on the month in June and were up 2.4% on
the year, down from 2.8% in May. This was the largest monthly decline
between May and June on record and the lowest annual inflation rate
since November 2009.

It was also way below the median forecast which was for a 0.1%
monthly drop and rise of 2.8% on the year.

The largest downward impact came from clothing and footwear, where
prices fell 4.2% on the month, the largest decline between May and June
on record. This knocked 0.17 percentage point off of annual CPI
inflation.

National Statistics said there was evidence that retailers had
brought forward sales from July, in part due to the wet weather. This
may have flattered the June outturn somewhat with the usual downward
impact now unlikely to be seen in July.

There was also a downward impact from food and non-alcoholic
beverages which knocked 0.12 percentage point off the annual CPI rate.
Meat prices were down with reports of the poor weather hitting demand
with fewer barbeque items being sold.

-London bureau: 0044 20 7862 7491; email: puglow@marketnews.com

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