UK Prices Rise in May After April Dip

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The FINANCIAL — Consumer prices in the U.K. rose on the year in May after falling the month before, bringing to an end Britain’s brief flirtation with deflation, according to Nasdaq.

The consumer-price index, which tracks prices for everything ranging from food and drink to domestic utilities, rose 0.1% in May compared with a year earlier, the Office for National Statistics said on June 16.

Prices fell 0.1% on the year in April, Britain’s first experience of falling prices for more than 50 years.

The return of inflation–albeit extremely-weak inflation–will reassure policy makers at the Bank of England that falling prices were just a blip. A widespread and persistent fall in prices–known as deflation–hurts consumer spending and makes it harder for governments, companies and households to service their debts.

The BOE expects annual inflation to accelerate to its 2% target by 2017, as energy prices recover from recent lows and wage growth in the U.K. picks up.

Investors expect central-bank officials to begin raising the BOE’s benchmark interest rate in mid-2016.

The ONS said Tuesday the pickup in inflation in May was driven by rising prices for airfares, and smaller falls in food and fuel prices than a year earlier.

Data showed other gauges of inflation in the U.K. remained relatively weak in May. Prices charged by companies at the factory gate were 1.6% lower than a year earlier and firms’ raw materials costs were down 12%.

House-price growth also slowed, dipping to an annual 5.5%, its slowest rate since December 2013, the ONS said. House prices boomed in 2014, prompting the BOE to take action to cool the market before consumers took on debts they may have struggled to repay. Regulators tightened lending standards and slapped limits on the amount of loans available to homebuyers. Barring a brief rise in prices between February and March, house price-growth has been slowing since September.

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Central banks around the world are grappling with subdued inflation, a consequence of feeble growth and tumbling oil prices. The European Central Bank in March began a program of asset purchases aimed at boosting growth and stoking inflation in the 19 nations that use the euro.


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