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

Published: 14th August 2019

Please note this is an amended version of the press release due to a technical issue

According to figures released this morning by the ONS, consumer price index inflation increased by 0.1 percentage points to 2.1 per cent in the year to July 2019. Our new analysis of 130,826 locally-collected goods and services prices included in the index this month, however, suggests a moderate increase in inflationary pressure.

Main points

  • Underlying inflation remained unchanged at 1 per cent in the year to July 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 the North at 1.4 per cent and lowest in the South East at 0.9 per cent in the year to July 2019 (table 1).
  • 19.2 per cent of goods and services prices changed in July, implying an average duration of prices of 5.2 months. 5.8 per cent of prices were reduced due to sales, 4.5 per cent fell for other reasons and 9.0 per cent were increases (figure 2).
  • The historical relationship between current trimmed mean inflation and future CPI inflation implies CPI inflation of 2.1 per cent in the year to July 2020.

Janine Boshoff, Economist with the Macroeconomic Modelling and Forecasting team, said: “Based on an analysis of over 130,000 goods, approximately 9% of price changes were due to increases. This is the lowest number since July 2018. Despite this, headline CPI inflation increased by 0.1 percentage points to 2.1 per cent in the year to July 2019. Our measure of underlying inflation, which excludes extreme price movements, remained unchanged at 1 per cent. Price decreases outnumbered price increases but sharp increases in consumer services, such as housing and household services, contributed to the increase this month. On this basis, we expect CPI inflation to settle just above the Bank of England’s target of 2 per cent in the coming year.”

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 18 September.

 

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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NIESR aims to promote, through quantitative and qualitative research, a deeper understanding of the interaction of economic and social forces that affect people's lives, and the ways in which policies can improve them.

Further details of NIESR’s activities can be seen on http://www.niesr.ac.uk or by contacting enquiries [at] niesr.ac.uk . Switchboard Telephone Number: +44 (0) 207 222 7665

 

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