BUSINESS LIVE: CPI plummets to 2.3%; M&S income rocket to £716m

Shares in sandwich maker Greencore hit their highest level in three years after it unveiled plans to return £30million to investors following a profit upgrade.

Having seen profits more than double to £28.3million in the first half to March 29, the FTSE 250 firm said its annual haul is now expected to be between £86million and £88million.

Greencore, which produces everything from ready meals to frozen Yorkshire puddings to sandwiches for supermarkets and convenience stores, said the boost came despite revenues falling 6.4 per cent to £866.1million, thanks to ditching a number of low-margin contracts.

Neil Birrell, chief investment officer at Premier Miton Investors:

‘UK inflation is following the trend elsewhere and is proving to be more resilient than hoped.

‘It is not getting back to target as fast as the Bank of England would like, which will probably delay the first interest rate cut.

‘The service sector has proved to be the sticking point and it will remain the bank’s focus over the next month or two, ahead of a potential rate cut in the summer.’

Daniel Casali, chief investment strategist at Evelyn Partners:

‘While the inflation data surprised on the upside, the broad downward trend in inflation is intact. This raises the possibility that the Bank of England (BoE) could still cut its base interest rate at its next interest-rate setting meeting in June. Though this is now a tight call.

‘In the data, the large leg down in inflation came from a 12% fall in the dual-fuel Ofgem price cap on household energy bills. Given that the energy price cap happens every three months, the next change would not be until July. However, Ofgem would probably make an official announcement in a couple of weeks to warn of an upcoming change.

‘Based on current market prices, Barclays reckons that the energy cap could be reduced by a further 6-7% points. If realised, this would imply further downward pressure on the household energy part of CPI inflation.

‘Aside from energy prices, the slowing trend in core CPI inflation is intact. Lead indicators, such as producer price inflation is also heading south. Moreover, cost-push led inflation from wages that feed into the service sector is also decelerating. Recently announced labour market data showed that annual private sector wage growth slowed to 5.9% in March, down from a peak of 8.2% in June 2023.

‘So, although the headline CPI inflation of 2.3% is higher than the BoE’s April forecast of 2.1%, an interest rate cut at its 20 June meeting is a distinct possibility given the data does not show the economy is overheating.

‘However, before that meeting there will be one more CPI print to win round a majority of Monetary Policy Committee (MPC) members to favour an interest rate cut. The MPC will also consider that wage growth (albeit slowing) remains elevated. Nevertheless, it will be encouraging for the MPC that falling job vacancies points to lower wage rates in the months ahead.’

Consumer price inflation slumped to 2.3 per cent in April from 3.2 per cent the previous month, reflecting changes to the energy price cap and piling pressure on the Bank of England to begin cutting interest rates.