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UK inflation slows to 2.3% in April on lower energy costs – business live

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Key events

UK government borrowing fourth highest April figure on record

The inflation figures are a bit of a disappointment for the chancellor Jeremy Hunt. And the public finance figures aren’t good either.

The government borrowed £20.5bn in April, the fourth highest April borrowing since monthly records began in 1993.

Borrowing in April – the difference between public sector spending and income – was £1.5bn more than in April 2023 and £1.2bn more than the £19.3 billion forecast by the Office for Budget Responsibility (OBR).

Factory gate prices rose by an annual rate of 1.1% in April, up from 0.7% in March, the ONS also said. Producer prices eventually feed through to consumer prices.

Factory gate prices rose by 1.1% in the year to April, up from a revised increase of 0.7% in the previous month.

Input prices fell by 1.6% in the year to April, up from a fall of 2.5%

Read more ➡️ https://t.co/FiUx3A9Bmn pic.twitter.com/UGIRLns539

— Office for National Statistics (ONS) (@ONS) May 22, 2024

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The Bank of England and the Office of Budget Responsibility are forecasting that inflation will fall to around 2% by early summer.

An HM Treasury spokesperson said about today’s data:

We rightly protected millions of jobs during Covid and paid half of people’s energy bills after Putin’s invasion of Ukraine sent bills skyrocketing – but it wouldn’t be fair to leave future generations to pick up the tab.

That’s why we must stick to the plan to get debt falling. The economy is turning a corner, with strong growth this quarter and inflation close to target, allowing us to cut taxes for the average worker by £900 a year.

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UK inflation slows to 2.3% on lower energy costs

Inflation in the UK has slowed to an annual rate of 2.3%, down from 3.2% in March, on lower energy costs.

Economists had expected a larger slowdown to 2.1%. March’s slowdown was also not as big as expected.

The Office for National Statistics said:

Falling gas and electricity prices resulted in the largest downward contributions to the monthly change in both CPIH and CPI annual rates, while the largest, partially offsetting, upward contribution came from motor fuels, with prices rising this year but falling a year ago.

In the 12 months to April 2024:

Consumer Prices Index (CPI) rose by 2.3%, down from 3.2% in the 12 months to March.

Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 3.0%, down from 3.8% in the 12 months to March.

➡️ https://t.co/MgOQsgwOkV pic.twitter.com/8Oof8bpYua

— Office for National Statistics (ONS) (@ONS) May 22, 2024

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Introduction: UK inflation expected to have slowed further in April

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Inflation in the UK is expected to have slowed further, to an annual rate of 2.1% in April from 3.2% in March, figures from the Office for National Statistics are expected to show at 7am BST.

Investec economist Ellie Henderson explains:

1 April is frequently referred to as ‘National Price Hike Day’ due to firms and governments often increasing prices at the start of the new financial year. For example, in April we traditionally see price hikes in TV, broadband, train fares and water bills.

But for inflation, what is key is the size of the monthly increase relative to last year. Although many consumers experienced large price rises in April, for the most part, these were smaller increases than last year, and thus will subtract from inflation.

As such, we have many downward influences on inflation. But the largest by far stems from gas and electricity prices. In February Ofgem announced that its energy price cap would fall by 12% in April. This feeds mechanically into the inflation calculation and knocks 0.4 percentage points off headline inflation.

But this effect is already baked in the pie, so to speak. The Bank of England knew when making its forecasts as part of the May Monetary Policy Report that there would be a large push lower due to energy. There are questions how prices in other sectors evolve, particularly within services, where inflation has remained particularly stubborn. Labour costs are key to this, and these would have risen for many firms in April due to the near 10% rise in the National Living Wage.

We will also get UK public finance data for April at the same time.

Later this morning, the former Post Office chief executive Paula Vennells will testify to the long-running Horizon inquiry. It is a moment wrongly convicted post office operators have waited years for. The inquiry is looking into how hundreds were pursued in the courts, fined and jailed over accounting shortfalls that were actually the fault of the Horizon IT system.

Vennells, who held the top job between 2012 and 2019, has become the highest-profile face of the scandal since the ITV drama Mr Bates vs the Post Office galvanised public opinion when it was screened in January – despite her keeping a low public profile in the past decade.

Jane Croft has looked at the key questions Vennells must answer. You can watch the hearing live here.

The Agenda

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