It’s widely accepted that the pandemic is a profoundly deflationary shock to the global economy. No surprise then that UK consumer price inflation slowed to 0.8 per cent in April from 1.5 per cent in March. In fact, the bulk of the decline was due to lower oil prices. Schemes to keep the economy on life support continue to support purchasing power – it may take some months for inflation to bottom as the economy goes through a painful readjustment. Input prices for manufacturers declined 5.1 per cent, whilst factory gate prices were 0.7 per cent lower. What comes next is anyone’s guess, but inflation could be round the corner as central banks and governments deal with vast debts. Read why Chris Dillow thinks inflation could be a boon for equities.
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