The Office for National Statistics released figures today showing that The Consumer Prices Index (CPI) fell in December to 2.0% – a record low since November 2009.
This decrease in rate was caused by slower price increases in food, non-alcoholic beverages and recreational goods/services over the festive period.
John Allan, national chairman of the Federation of Small Businesses, said this was a welcome relief for hard-pressed households and businesses:
“With the economy now growing, our members will be pleased that pressures on the cost of doing business are easing.”
Falling inflation is seen as a sign of economic growth because it increases the potential for business profits and reinforces consumer confidence in the currency.
This is consistent with the Treasury’s forecasts for the UK economy, which predicts a 2.4% growth in GDP for 2014.
The Bank of England was set a 2% target for CPI by the government in 2003, but the financial crisis of 2008 saw inflation spike to rates as high as 5.3%, the highest since the early 90s.
Andrew Sentance, senior economic adviser at PricewaterhouseCoopers, said:
“This is just the fifteenth month when UK inflation has been at 2% or below since mid-2005. High inflation has been the ‘new normal’ for the UK since the financial crisis.”