New deflation fears sparked by official figures

Both the Consumer Price Index (CPI) and the Retail Price Index (RPI) registered significant year-on-year falls in April, the Office of National Statistics (ONS) confirmed today.

The government’s preferred inflation benchmark dropped from 2.9 to 2.3 per cent over the month, as the recession took its toll on demand for goods and services.

Meanwhile, the RPI, which includes property prices, fell from -0.3 to -1.2 per cent.

This is the lowest on the index since records began - and will increase concerns that the UK risks falling into deflation.

Falling prices tend to be very damaging to recession-hit economies, as the trend damages consumer and business spending and peoples’ ability to pay off their debts.

The effect of gas and electricity bills was seen by the ONS as having a significant effect on the April indices, with providers announcing over the month that they would reduce bills in response to movements on the commodities markets.

Housing, alcohol and tobacco costs also registered falls according to the report.ADNFCR-2318-ID-19176558-ADNFCR