NIESR Press Note – NIESR reacts to the latest ONS CPI inflation statistics released today

Published: 19th June 2019

According to figures released this morning by the ONS, consumer price index inflation decreased by 0.1 percentage points to 2.0 per cent in the year to May 2019. Our new analysis of 130,821 locally-collected goods and services prices included in the index this month suggests that this fall was driven by a few volatile goods and services such as air fares. The underlying rate of inflation, which excludes the most extreme price changes, rose not only at the national level but in every region of the country.  Despite this increase, underlying inflation remains consistent with the 2 per cent inflation target.

 

Main points

  • Underlying inflation increased by 0.3 percentage points to 0.8 per cent in the year to May 2019, as measured by the trimmed mean, which excludes 5 per cent of the highest and lowest price changes (figure 1).
  • At the regional level, underlying inflation was highest in London at 1.1 per cent and lowest in the East Midlands at 0.7 per cent in the year to May 2019 (table 1).
  • 17.9 per cent of goods and services prices changed in May, implying an average duration of prices of 5.6 months. 4.2 per cent of prices were reduced due to sales, 3.6 per cent fell for other reasons and 10 per cent were increases (figure 2).
  • The historical relationship between current trimmed mean inflation and future CPI inflation implies CPI inflation of 1.9 per cent in the year to May 2020.

 

Dr Jason Lennard, Senior Economist, said: “Headline CPI inflation decreased by 0.1 percentage points to 2.0 per cent in the year to May 2019. Our analysis of more than 130,000 goods and services included in the basket, however, suggests that the fall is due to a small number of large price changes, such as air fares. Our measure of underlying inflation, which excludes extreme price movements, picked up by 0.3 percentage points at the national level. Underlying inflation also increased in every region of the United Kingdom, rising most in the West Midlands, the North and London".

This analysis builds on the work presented in the National Institute Economic Review, which constructs a measure of trimmed mean inflation based on the goods and services prices that underlie the consumer price index.

 

Our next analysis of consumer prices will be published on 17 July.

 

Figure 1. Inflation: CPI and trimmed mean

Note: Our measure of trimmed mean inflation excludes 5 per cent of the highest and lowest price changes. The level of trimmed mean inflation is typically lower than CPI inflation due to differences in how the largest price changes are treated and to how the prices are weighted.

 

 

Figure 2. Decomposing price changes: Decreases due to sales, decreases due to other reasons and increases

 

 

Table 1. Regional trimmed mean inflation (per cent)

 

2018

 

 

 

 

 

 

 

2019

Region

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

London

1.6

1.4

1.2

1.4

1.2

1.0

1.0

1.0

0.9

1.1

1.0

0.7

1.1

South East

1.2

1.1

1.1

0.9

0.8

0.7

0.5

0.4

0.6

0.8

0.5

0.4

0.7

South West

1.4

1.4

1.4

1.3

0.8

0.4

0.4

0.5

0.6

0.7

0.7

0.4

0.7

East Anglia

1.4

1.3

0.9

1.0

0.9

0.7

0.7

0.7

0.8

0.8

0.8

0.5

0.7

East Midlands

1.3

1.2

1.2

1.2

1.0

0.9

0.8

0.8

0.8

0.8

0.7

0.5

0.7

West Midlands

1.4

1.4

1.0

1.3

1.1

0.7

0.6

0.8

0.6

0.7

0.7

0.2

0.7

Yorkshire and the Humber

1.0

0.7

0.6

0.5

0.4

0.5

0.4

0.5

0.4

0.6

0.6

0.3

0.7

North West

1.1

1.0

0.8

0.8

1.0

0.6

0.6

0.6

0.8

0.9

0.9

0.6

0.8

North

1.6

1.4

0.9

1.0

1.0

0.6

0.7

0.8

0.8

0.7

0.8

0.4

0.9

Wales

1.1

1.2

1.0

1.2

1.0

0.8

0.7

0.8

0.9

0.6

0.7

0.6

0.9

Scotland

1.5

1.3

1.3

1.1

1.0

0.8

0.8

0.8

0.9

0.8

0.7

0.4

0.7

Northern Ireland

1.0

1.1

0.8

0.9

0.8

0.3

0.6

0.7

0.8

0.9

0.7

0.4

1.0

United Kingdom

1.3

1.2

1.0

1.0

0.9

0.7

0.6

0.7

0.7

0.8

0.7

0.5

0.8

                                           

Note: Our measure of trimmed mean inflation excludes 5 per cent of the highest and lowest price changes. The level of trimmed mean inflation is typically lower than CPI inflation due to differences in how the largest price changes are treated and to how the prices are weighted.

 

ENDS

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Notes for editors:

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