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

Published: 18th September 2019

According to figures released this morning by the ONS, consumer price index inflation decreased by 0.4 percentage points on the month to 1.7 per cent in the year to August 2019. Our new analysis of 129,762 locally-collected goods and services prices included in the index this month suggests that the slowing of inflation was widespread across the country, driven by fewer firms increasing prices.

 

Main points

  • Underlying inflation remains unchanged at 1 per cent in the year to August 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 West at 1.3 per cent and lowest in Wales at 0.7 per cent in the year to August 2019 (table 1).
  • 19.8 per cent of goods and services prices changed in August, implying an average duration of prices of 5 months. 4.8 per cent of prices were reduced due to sales, 4.1 per cent fell for other reasons and 10.9 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 August 2020.

 

Jason Lennard, Senior Economist, said: Consumer price inflation was lower than expected at 1.7 per cent in the year to August 2019. Our analysis of 130,000 goods and services included in the basket suggests that fewer firms raised prices than is typical for this time of year. Firms are probably waiting to see beyond 31 October before adjusting prices. The slowing of inflation was widespread, falling in 10 of the 12 regions of the United Kingdom with the biggest drops in Northern Ireland and Wales.”

 

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 16 October.

 

                          

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

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

London

1.4

1.2

1.0

1.0

1.0

0.9

1.1

1.0

0.7

1.1

1.2

1.1

1.1

South East

0.9

0.8

0.7

0.5

0.4

0.6

0.8

0.5

0.4

0.7

1.0

0.9

0.8

South West

1.3

0.8

0.4

0.4

0.5

0.6

0.7

0.7

0.4

0.7

0.9

1.0

0.8

East Anglia

1.0

0.9

0.7

0.7

0.7

0.8

0.8

0.8

0.5

0.7

1.0

1.1

1.0

East Midlands

1.2

1.0

0.9

0.8

0.8

0.8

0.8

0.7

0.5

0.7

1.0

1.0

0.9

West Midlands

1.3

1.1

0.7

0.6

0.8

0.6

0.7

0.7

0.2

0.7

0.8

1.0

1.0

Yorkshire and the Humber

0.5

0.4

0.5

0.4

0.5

0.4

0.6

0.6

0.3

0.7

1.3

1.1

1.0

North West

0.8

1.0

0.6

0.6

0.6

0.8

0.9

0.9

0.6

0.8

1.1

1.1

1.3

North

1.0

1.0

0.6

0.7

0.8

0.8

0.7

0.8

0.4

0.9

1.2

1.4

1.2

Wales

1.2

1.0

0.8

0.7

0.8

0.9

0.6

0.7

0.6

0.9

1.0

1.0

0.7

Scotland

1.1

1.0

0.8

0.8

0.8

0.9

0.8

0.7

0.4

0.7

0.9

0.9

0.8

Northern Ireland

0.9

0.8

0.3

0.6

0.7

0.8

0.9

0.7

0.4

1.0

1.0

1.3

1.0

United Kingdom

1.0

0.9

0.7

0.6

0.7

0.7

0.8

0.7

0.5

0.8

1.0

1.0

1.0

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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