UK Inflation Update May 2024

The UK Office for National Statistics released its Consumer Price Inflation (CPI) report at 7:00 AM BST on May 22, 2024. Here are the key points:

Both the Consumer Prices Index including owner occupiers’ housing costs (CPIH) and the Consumer Prices Index (CPI) witnessed a slowdown in their annual rates. CPIH rose by 3.0% in the 12 months to April 2024, down from 3.8% in March, while CPI rose by 2.3%, down from 3.2% in the same period.

The Owner occupiers’ housing costs (OOH) component of CPIH saw a notable increase, rising by 6.6% in the 12 months to April 2024, marking its highest annual rate since July 1992. This rise contributed to the overall CPIH figure.

Falling gas and electricity prices played a significant role in easing the monthly change in both CPIH and CPI annual rates. This trend was attributed to the lowering of the Office of Gas and Electricity Markets (Ofgem) energy price cap in April 2024.

Prices of food and non-alcoholic beverages rose by 2.9% in the year to April 2024, down from 4.0% in March. This easing in the annual rate was primarily driven by decreases in prices across various food product categories.

Prices in the transport division fell by 0.1% in the year to April 2024, with notable contributions from second-hand cars and maintenance and repairs. However, there were upward effects from motor fuels and air fares.

Core CPIH and Core CPI both saw decreases in their annual rates, indicating a broader moderation in inflationary pressures. The CPI all goods index experienced a negative rate for the first time since February 2021, while the CPI all services index showed a slight decrease from the previous month.

The recent inflation data shows a mixed economic landscape: some sectors are moderating while housing costs are notably increasing. Annual inflation rates have eased, indicating a potential stabilisation in price pressures, but uncertainties linger, especially regarding global energy markets and supply chains. Despite inflation slightly surpassing expectations, it’s essential to assess the numbers in absolute terms. Overall, inflation trends are heading in the right direction. The FX market response has seen sterling rallying against other currencies. As CPI inflation approaches the Bank of England’s 2% target, historical patterns suggest a possible interest rate cut, possibly in June. So, the idea of a June BOE rate cut remains possible as delaying action risks inflation falling well below the 2% target.

In conclusion, while the latest inflation data points towards a moderation in price growth across several sectors, vigilance is warranted to monitor potential future developments and their implications for the broader economy. The article above is for informational purposes only and should not be considered investment advice. Readers should conduct their own research and consult with a qualified financial advisor before making any investment decisions. The information provided is based on current market conditions and political events, which are subject to change and may impact financial markets. The author and publisher are not responsible for any losses or damages that may result from the use of this information.