Producer price deflation deepened further last month to a 35-month low, and consumer price inflation dropped to its smallest in more than two years. Although the impact of reopening pushed up services inflation, this was more than offset by lower food and energy inflation, driven largely by base effects. The labour market is tightening, which should continue to put some upward pressure on services inflation over the coming months. But the government’s ceiling of “around 3.0%” for the headline figure won’t be tested this year.
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