UK Prices Drop for the First Time in Two Years
The prices of goods in UK shops have dropped for the first time in two years, according to the Office for National Statistics (ONS). The ONS reported that the Consumer Prices Index (CPI) fell by 0.1% in July, compared to the same month last year. This is the first time since July 2017 that the CPI has dropped.
Reasons for the Price Drop
The ONS attributed the price drop to a decrease in the cost of clothing and footwear, as well as a fall in the cost of motor fuels. The cost of clothing and footwear fell by 2.7% in July, compared to the same month last year. This is the largest annual fall since records began in 1996. The cost of motor fuels also fell by 1.2%, the largest annual fall since December 2008.
Impact on Inflation
The fall in prices has had a significant impact on inflation. The ONS reported that the annual rate of inflation, as measured by the CPI, fell to 1.6% in July, down from 1.8% in June. This is the lowest rate of inflation since December 2016.
Impact on Households
The fall in prices is likely to be welcomed by households, as it will help to ease the pressure on their finances. The ONS reported that the cost of living has risen by 2.2% over the past year, which is below the rate of wage growth. This means that households have more money to spend on other items, such as leisure activities and holidays.
Impact on the Economy
The fall in prices is also likely to have a positive impact on the economy. Lower prices mean that consumers are more likely to spend, which will help to boost economic growth. The ONS reported that retail sales rose by 1.3% in July, compared to the same month last year. This is the largest annual increase since December 2017.
Outlook for the Future
The outlook for the future is uncertain, as it is unclear how long the fall in prices will last. The ONS reported that the cost of clothing and footwear is likely to remain low in the coming months, as retailers continue to offer discounts in order to attract customers. The cost of motor fuels is also likely to remain low, as the price of oil remains low.
However, the outlook for the economy is more positive. The ONS reported that the UK economy is expected to grow by 1.3% in 2019, which is higher than the 1.2% growth rate forecast in June. This suggests that the economy is on track to recover from the slowdown seen in the first half of the year.
Conclusion
The prices of goods in UK shops have dropped for the first time in two years, according to the Office for National Statistics. The fall in prices is likely to be welcomed by households, as it will help to ease the pressure on their finances. The fall in prices is also likely to have a positive impact on the economy, as it will encourage consumers to spend. The outlook for the future is uncertain, but the UK economy is expected to grow by 1.3% in 2019, which is higher than the 1.2% growth rate forecast in June.