The Consumer Price Index (CPI) annual inflation rate showed an unexpected and marked fall in April to 2.4%, after six consecutive months in a tight range of 2.7% to 2.8%.
By far the largest downward contribution to the inflation figure came from transport costs, particularly motor fuels and air fares. These falls were helped by easing oil prices, with the sterling cost of a barrel of Brent crude down 6.8% between March and April 2013. Petrol and diesel prices both fell between these months (by 2.1p and 3.9p a litre respectively) compared with rises of 3.2p and 2.1p a year earlier. Prices for air fares fell by 6.4% between March and April 2013, compared with a rise of 7.4% between the same two months a year ago.
The only notable upward contribution came from price movements for food & non-alcoholic beverages. The upward effect came most notably from vegetables where cold weather in the UK hit crops.
While energy price movements are mainly responsible for the easing in inflation in April, it is worth noting that weak economic conditions continue to bear down on services inflation which eased from a peak of 4.2% in November to 3.9% in March and fell further to 3.4% in April.
Favourable commodity prices, a steadier sterling performance and weak wage growth have also helped reduce goods inflation to 1.7% from around 2% in the past four months. Provided these benign conditions persist, it now looks likely that inflation over the next few months will settle at a lower level than previously feared, with a beneficial impact on real disposable incomes and consumer spending.