The rate of consumer price inflation fell to its lowest recorded level in February, according to the latest figures from the Office for National Statistics (ONS).
The consumer price index (CPI), which tracks changes in the prices of goods purchased by households, remained level in the year to February. This means that it has fallen from 0.3% in the year to January—its previous lowest level—to 0.0%, signalling that price deflation may be around the corner.
The change was caused in part by the continuing fall of food and motor fuels, the costs of which have fallen or remained static for 10 and 18 months respectively, and contributed a combined 0.9 percentage point reduction to overall inflation.
Meanwhile, ‘core’ inflation (long-term inflation that is not affected by short-term or volatile price movements) remained at 1.2% in the year to February. This indicates that volatile goods such as alcohol, energy, food and tobacco exerted most of the downward pull on the overall figures 1.
This is important to note, because whilst the UK is experiencing zero inflation overall, not all classes of goods and services are falling in price. This may continue to be the case even if the UK slides into a period of deflation; there is no indication as yet that such a period would be protracted, or that it would have the economic effect that persistent periods of deflation, such as that experienced in the 1920s and 30s, had 2.