UK inflation expected to have slowed further in April - business live

Source: The Guardian
Author: Julia Kollewe

Introduction: UK inflation expected to have slowed further in April

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Inflation in the UK is expected to have slowed further, to an annual rate of 2.1% in April from 3.2% in March, figures from the Office for National Statistics are expected to show at 7am BST.

Investec economist Ellie Henderson explains:

1 April is frequently referred to as 'National Price Hike Day' due to firms and governments often increasing prices at the start of the new financial year. For example, in April we traditionally see price hikes in TV, broadband, train fares and water bills.

But for inflation, what is key is the size of the monthly increase relative to last year. Although many consumers experienced large price rises in April, for the most part, these were smaller increases than last year, and thus will subtract from inflation.

As such, we have many downward influences on inflation. But the largest by far stems from gas and electricity prices. In February Ofgem announced that its energy price cap would fall by 12% in April. This feeds mechanically into the inflation calculation and knocks 0.4 percentage points off headline inflation.

But this effect is already baked in the pie, so to speak. The Bank of England knew when making its forecasts as part of the May Monetary Policy Report that there would be a large push lower due to energy. There are questions how prices in other sectors evolve, particularly within services, where inflation has remained particularly stubborn. Labour costs are key to this, and these would have risen for many firms in April due to the near 10% rise in the National Living Wage.

We will also get UK public finance data for April at the same time.

Later this morning, the former Post Office chief executive Paula Vennells will testify to the long-running Horizon inquiry. It is a moment wrongly convicted post office operators have waited years for. The inquiry is looking into how hundreds were pursued in the courts, fined and jailed over accounting shortfalls that were actually the fault of the Horizon IT system.

Vennells, who held the top job between 2012 and 2019, has become the highest-profile face of the scandal since the ITV drama Mr Bates vs the Post Office galvanised public opinion when it was screened in January - despite her keeping a low public profile in the past decade.