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Oil price fall ushers in zero inflation

oil

Data from the Office for National Statistics has revealed that inflation hit zero for the first time on record last month as measured by the consumer price index. The decline from 0.3% in January has prompted concerns that long-term deflation could cause chaos in the UK housing market. In the short-term, cheaper consumer products can be good news for homeowners but if deflation goes on for too long it can 'flip a switch' in the housing market. Lower day-to-day prices put more money in the householder's pocket, meaning they are more likely to consider bigger houses. With interest rates also low, credit becomes cheaper, leading to more activity in the mortgage market. The ONS attributed the decline to a slump in oil costs and lower food prices, including bread, milk, vegetables and meat. Morrisons reduced prices on more than 100 items last month by 22 per cent as it fought for market share with Lidl and Aldi. Prices for a range of 'recreational goods and services', including games, gardening tools and books, also fell, while cheaper petrol helped push inflation lower.

 

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