Inflation falls unexpectedly in June

Economists expect inflation was 0.2 per cent in the three months ended June 30, for an annual rate of 1.9 per cent, according to the median in a poll of 15 economists surveyed by Bloomberg.

Import prices for factories slipped 0.2 per cent on the month and the annual rate of gains slowed to 9.9 per cent from 12.3 per cent.

CPI measures the weighted average of prices of a basket of goods and services, such as food, transportation, and medical care.

And if so, what does that mean for living standards and borrowing costs? The key drivers of weaker prices included a fall in motor fuel prices and in recreational and cultural goods, this offset rises in furniture and furnishings prices.

However, last week, ONS data showed that inflation-adjusted wages grew at the slowest pace in almost three years as rising consumer prices eat into Briton's weekly paychecks and hammering consumer spending and the EY Item Club assessment of the United Kingdom economy was pared down yesterday as a result of the uncertainty linked to the country's pending exit from the European Union. This was the first decline in CPI since October previous year, and the first decline in the CPIH index (which includes owner occupier housing costs) since April 2016.

The sharp fall in the value of the pound following the UK's vote to leave the European Union past year has raised the cost of imports and pushed up the rate of inflation.

Inflation in the United Kingdom unexpectedly slowed in June, giving respite to Bank of England policy makers concerned that price growth was getting out of hand.

Clothing and shoes saw a small fall in inflation, however, with price growth slowing from 3.1pc to 2.7pc.

In "seasonally adjusted" terms inflation came in at "negative 0.1 per cent", Statistics NZ said.

On a monthly basis, output prices remained unchanged and input prices slid 0.4%.

British consumers have been feeling the squeeze from rising prices since June's Brexit vote caused a sharp fall in the pound. The Bank of England's rhetoric has taken an increasingly hawkish tone in recent weeks, with Mark Carney himself saying at the end of last month that "some removal of monetary stimulus is likely to become necessary".

Earlier this morning it had hit a 2017 high above $1.31 as traders bet that the inflation data would be higher than anticipated.

Raising interest rates against the backdrop of falling real incomes would further erode consumer spending power and that is bad news for an economy that relies on consumer spending for three-quarters of its growth.

Vanessa Coleman