Falling Inflation Is Masking Some Very Nasty Surprises

Well, we're finally out of double figures. The headline Consumer Prices Index (CPI) rate of inflation for April came in at 8.7 per cent against 10.1 per cent in March.

- JAMES MOORE

It's a steep fall, but a lot less steep than most had hoped or expected; a Reuters poll of economists predicted 8.2 per cent, while the Bank of England’s more conservative forecast was 8.4 per cent.

Set against those numbers, that result represents a substantial overshoot, especially when you consider that energy – the principal cause of the worldwide inflationary spike – is now playing less of a role, with bills expected to ease compared to last year.

Food prices are picking up the slack, remaining stubbornly high; the official figure came in at 19.1 per cent, barely changed on the previous month’s 19.2 per cent despite the fuss supermarkets have been making about cutting the price of some essentials.

Equally as worrying will be the performance of core inflation, which excludes volatile components such as food and energy. A measure of the underlying inflation in the economy, the expectation was that it would stay flat at 6.2 per cent. Instead, it increased, and sharply, to 6.8 per cent.