Underlying Inflation in the UK Rises to 6.2 Per Cent, the Highest Since January 1992!

Main points

• Headline consumer price inflation increased to 9.4 per cent in June 2022 from 9.1 per cent in May. Our measure of underlying inflation which excludes 5 per cent of the highest and lowest price changes, increased to 6.2 per cent – which is the highest since January 1992!
• Between May and June, the transport sector contributed 0.16 percentage points to the change in the headline figure, closely followed by food and non-alcoholic beverages and restaurants and hotels.
• Our analysis suggests that in June, slightly above 28 per cent of goods and services prices changed with approximately 17,200 items (15 per cent) recording price increases, while 4.1 per cent of prices were reduced due to sales and 3.9 per cent fell for other reasons.
• Underlying inflation increased in all of the 12 UK regions in June. Underlying inflation was again the highest in the West Midlands at 6.9 per cent, whereas Wales had the lowest rate at 5.4 per cent in June.
• NIESR forecasts annual CPI inflation will peak close to 11 per cent towards the end of 2022/beginning of 2023, because of the hike in the energy price cap, and remain above target through 2023.
• Latest earnings data covering the three months to May 2022 suggests that surging prices are burning a hole through household pockets. In the three months to May, regular real pay fell at a record rate of 2.8 per cent on the year.
• The Bank of England’s decision to wind down their balance sheet will to some extent help control the speed at which they raise interest rates as they navigate uncharted territories, with risks of both a recession and inflation becoming persistent.