Inflation drops to 0.8% as Covid-19 hits prices
UK inflation fell to a near four-year low of 0.8% as energy costs fell and clothing retailers cut prices to shift stock during the coronavirus crisis, official figures showed.
The annual rate of consumer price inflation almost halved from 1.5% between March and April, the Office for National Statistics said. The reduced rate was the lowest since August 2016 and was slightly below economists' average forecast of 0.9%.
The ONS said falling energy bills, transport costs including petrol, clothing and footwear were the biggest contributors to the decline. Clothing retailers hurt by the government's economic lockdown discounted items more heavily than usual to make sales, the ONS said.
Prices of video games and consoles, board games, children's toys and knitting wool balls rose as households sought things to do during the lockdown. The ONS said higher prices for fresh vegetables may have been caused by switching to UK-grown produce from food grown abroad.
The Bank of England has said inflation could fall below 1% in the next few months and that price rises could drop to zero later in 2020 as the full impact of the coronavirus crisis takes effect. Economists said April's figures showed prices heading for zero.
After cutting interest rates to a record low of 0.1% the BoE has said it will take further measures to support the economy if needed. With inflation falling far below its 2% target the monetary policy committee (MPC) has room to do so.
Samuel Tombs, a UK specialist at Pantheon Macroeconomics, said: "Looking ahead, we continue to expect CPI inflation to fall all the way to zero by the summer … The inflation outlook, then, supports the MPC doing more to stimulate the economy at its next meeting in mid-June. We look for a further £100bn of QE (quantitative easing) to be announced."