The latest inflation figures from the Office for National Statistics (ONS), shows that annual CPI inflation in June 2017 fell to 2.6 percent from 2.9 percent in May.
When taking homeowner occupier costs into account (CPIH), inflation fell from 2.7 percent in May to 2.6 percent in June. This is the first fall in the CPIH inflation rate since April 2016 says the ONS. Note that CPIH is not an official National Statistic.
Falling prices for motor fuels and some recreational and cultural goods and services drove the fall in the rate, which were partially offset by rising furniture and furnishings prices.
The general recent consensus was that the slide in Sterling, which many ascribe to Brexit, would place upward pressure on inflation, but this does not seem to have fed through into the UK economy as expected.
Peter Dowd MP, Labour's Shadow Chief Secretary to the Treasury, said:
"Despite the headline fall in inflation, people throughout the country will be worse off yet again this month, as wages grow more slowly than prices. Real wages are still lower than they were when the Tories came to power in 2010.
"After seven years of Conservative failure on the economy, only a Labour government will tackle the scandal of falling living standards, beginning with a £10 per hour Real Living Wage and an end to the unfair public sector pay cap."
Commenting, Liberal Democrat Shadow Chancellor Vince Cable said:
"This slight slowing of inflation is good news, but the government must not be let off the hook.
"Cash-strapped families are still being squeezed by the rising cost of food and household goods.
"The cap on public sector pay remains completely unsustainable. Teachers will still be facing a real-terms pay cut of around £600 this year if inflation carries on at this rate.
"The pressure remains on the government to protect living standards by changing course on Brexit and lifting the cap on public sector pay."
Jonathan Bartley, co-leader of the Green Party, said:
"Despite a slight drop in inflation workers are still seeing their pay squeezed, as prices continue to rise faster than wages. The Government will try and paint today's figures as good news – but the truth is that the Tories are presiding over an economy in which working people struggle to feed their families. Communities never recovered from the bankers' crisis in 2008 and now they're faced with the economic calamity of a Tory brexit.
"It's abundantly clear that Britain needs an urgent pay rise, to stop more families falling into poverty. Public sector pay caps must be scrapped and the minimum wage should be raised without delay. The cruel benefits squeeze must also be abandoned, to stop Britain's poorest people falling into destitution. The Tory high command are stuck like a rabbit in the Brexit headlights – unable to take the action needed to stop our economy and living standards falling off a cliff."
Andrew Sentance, senior economic adviser at PwC, said:
"The surge in inflation we have seen since last summer appears to have been checked in June, with the annual increase in the Consumer Prices Index dropping back to 2.6 percent. Falling oil prices are one of the key factors driving this reduction, bringing down the cost of petrol and diesel for motorists.
"But we have not necessarily passed the peak of inflation. Oil prices are volatile and could bounce back later this year. Meanwhile, the big fall in the value of the pound since last summer is still working its way through the pipeline and has not yet fully fed through into shop prices.
"We are also seeing continued upward pressure on inflation from food prices, which are also very sensitive to the level of the pound.
"It is still likely that inflation will reach 3 percent or a little higher in the second half of the year. Consumers felt some respite from the inflation squeeze last month, but price rises are still likely to run ahead of wage increases for the rest of this year – continuing the current consumer squeeze and holding back economic growth."
Azad Zangana, Senior European Economist at Schroders, said:
"The release of the June UK inflation figures has shown a surprise drop in the annual rate of inflation. Based on the consumer price index (CPI), annual inflation fell from 2.9% in May to 2.6% in June against consensus expectations of no change. The core inflation rate, which excludes volatile food, tobacco and alcohol, also came down, falling from 2.6% to 2.4%.
"Transport prices were the biggest drag on the annual rate, as has been the case in recent months. However, the second largest drag came from recreation and culture services – where prices fell 0.2% over the month compared to a 0.7% rise a year earlier. The ongoing squeeze on household budgets may have lowered demand for these non-essential services, causing prices to fall, but the hot weather may have also played a role.
"Overall, the lower-than-expected inflation figures will ease pressure on the Bank of England to consider a rise in interest rates ahead of its August meeting. The next Inflation Report should show a much weaker growth outlook than previously expected, with inflation only slightly above the Bank's forecast. We continue to expect the Bank of England to keep interest rates on hold until well into 2019."
Shilen Shah, Bond Strategist at Investec Wealth & Investment, said:
"The downward surprise in June's inflation print removes some of the hawkish urgency within the BoE, with petrol prices and recreational items being the primary contributors. The inflationary impact of Sterling's fall following the Brexit vote seems to have lessened following the recent one-year anniversary of the Brexit vote. Core inflation was also weaker than the consensus at 2.4%, hinting that the domestic economic slowdown may finally be creating some downward pressure on inflation."
Chris Bryce, IPSE's Chief Executive, commented:
"Although the drop in inflation is a welcome change to the pretty much continuous increases since autumn last year, it's not enough to stop the cost of living squeeze. People across the UK are still facing rising food and household goods prices, with rates of pay that just aren't keeping pace. We've also had continuous reports from the country's freelance community that their business costs have been going up and up over the last year.
"On the other hand, the falling petrol prices that have driven this drop in inflation are definitely good for freelancers. Because of their regular long-distance trips to different clients' premises, they are among the UK's heaviest road users.
"The drop in inflation also justifies the Bank of England's caution about raising interest rates. With these figures in mind, it's looking like an increasingly sensible approach."
TUC General Secretary, Frances O'Grady, comments:
"The government must stop this cost of living squeeze. Many working people are caught in a vice as rising prices crush their pay.
"Ministers claim they are listening to struggling families. But now is the time to prove it. Britain needs a pay rise across the public and private sector."
UNISON assistant general secretary Christina McAnea said:
"With inflation much higher than wages, nurses, teaching assistants and care staff are getting poorer.
"The government's harsh approach to public sector pay is completely out of step with the public mood.
"Every day the pay cap stays, public sector employees are leaving for better paid jobs elsewhere. And it gets that bit harder for the NHS, police forces, schools and town halls to recruit new staff.
"The Chancellor should show he understands the financial struggles of millions of families and end the pay cap now."
Jo Darbyshire, Commercial Director at Avalon, commented:
"There's no escaping the fact that inflation is having an impact on our daily finances. A fall may be temporary relief for consumers, but it will take a while to fully recover from months of growing prices and ultimately it's still creeping upwards. High costs simply mean that the money in our banks and pockets will unfortunately buy you less. This makes it vital to have a plan to stay in control of household spending and, most importantly, ensuring you have a safety net should you face any unexpected financial shocks."