Economy escapes deflation despite gas price drop

THE rate of inflation was unchanged in March at 0%, the Office for National Statistics said.

The main downward pressures on prices came with falls in clothing and gas costs.

These were offset by a rise in the price of petrol and diesel and smaller upward contributions from a variety of other products such as food, the ONS said.

While CPI inflation was in line with expectations, core inflation – which strips out energy costs and food prices, was below expectations at 1% – economists had expected 1.2%.

At least one expert believes deflation is not far away on the horizon.

Vicky Redmond, chief UK economist at Capital Economics, said: “The indirect impact of lower energy prices will take a while to come through and so the core rate could drop further in the coming months, tipping the headline rate below zero.

“Even if the UK does narrowly avoid deflation, inflation is still likely to hover close to zero for most of 2015.”