Latest inflation rates are a ray of economic sunshine

Falls in petrol prices have contributed to a fall in inflation. Photo: REUTERS

Are you sitting comfortably? Then I'll begin: we have a ray of economic sunshine to report. Inflation (the CPI measure) has dropped in May, falling to 2.8 per cent.

This is better than most economists had forecast; they expected it to stay at the 3 per cent level it reached in April. The reason for the drop is largely lower food prices (farmers are charging less and that's being passed on by shops) and lower oil prices leading to lower petrol prices.

It's an important trend which we should see continue through this year, helping households as the rate of price increases slows. So cheer up, inflation was a whopping 5.2 per cent in September: today things are a little less bad than before.