Inflation returns, but only just, in May
A tiny increase means deflation only lasted a month.
Inflation has returned, albeit by a tiny amount, with the latest figures from the Office for National Statistics (ONS) showing there was a 0.1% annual increase in consumer prices in May.
As with April’s figures, which showed a -0.1% change in prices, the timing of Easter this year has had an impact on the Consumer Prices Index (CPI).
An earlier Easter meant the cost of transport, particularly air fares, dipped in April, but this has now been reversed in May.
And food and motor fuel prices are also on the rise.
Games, toys and hobbies dropped in price though, with many major toy retailers having big sales in May ahead of the summer holidays. Data processing equipment, such as printers and routers, is also falling in price.
So deflation only lasted for a month, as many experts predicted it would.
The Bank of England has forecast inflation will continue to rise slowly back towards its Government-imposed target of 2% in the next two years.
What this means for our money
There's actually very little real change to the money in our pockets from miniscule deflation to miniscule inflation. While food prices might be marginally more expensive than they were a year ago, the supermarket price war on food and everyday essentials shows no signs of stopping, with Morrisons the latest of the big names to cut prices.
And while petrol and diesel prices are creeping up following falls earlier this year, there are forecasts they could drop again as a result of a dip in oil prices.
If inflation does continue to increase slowly as expected, it means an interest rate rise isn't likely before next spring at the earliest.
For savers, the return to inflation means many accounts still beat inflation but savings rates are still low by historical standards. If you want to save in cash, take a look at Where to earn most interest on your cash to see where you can earn most.
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