Inflation remains stubbornly high
The pressure on households from the rising of cost of living showed no sign of letting up in figures published by the Office for National Statistics (ONS) today 21/06/23. They showed that headline inflation remains at 8.7%. Economists had widely predicted a fall to 8.5%.
This is worrying news for borrowers, as it is now predicted that the Bank of England may add between 0.25% and 0.5% onto the base interest rate. It is currently at 4.5%.
On Twitter ONS chief economist Grant Fitzner said:
“After last month’s fall, annual inflation was little changed in May and remains at a historically high level. The cost of air fares rose by more than a year ago and is at a higher level than usual for May.
“Rising prices for second-hand cars, live music events and computer games also contributed to inflation remaining high. These were offset by a fall in the cost of petrol.”
ONS Consumer Price Index figures May 2023 ONS Tables
| Year on Year changes | Apr-23 | May-23 |
| CPI (overall index) | 8.7% | 8.7% |
| 01 Food and non-alcoholic beverages | 19.0% | 18.3% |
| 02 Alcoholic beverages and tobacco | 9.1% | 9.3% |
| 03 Clothing and footwear | 6.8% | 7.1% |
| 04 Housing, water, electricity, gas and other fuels | 12.3% | 12.1% |
| 05 Furniture, household equipment and maintenance | 7.5% | 7.5% |
| 06 Health | 7.0% | 8.3% |
| 07 Transport | 1.5% | 1.2% |
| 08 Communication | 7.9% | 9.1% |
| 09 Recreation and culture | 6.3% | 6.7% |
| 10 Education | 3.2% | 3.2% |
| 11 Restaurants and hotels | 10.2% | 10.3% |
| 12 Miscellaneous goods and services | 6.8% | 6.8% |
Food inflation is still really high but fell to 18.3% in May, from 19% in April, as rising prices started to slow.
Helen Dickinson, Chief Executive of the British Retail Consortium in a statement said:
“It is a really positive sign that food inflation has fallen for the second consecutive month, the first time this has happened since the Ukraine war began. While some prices continue to rise, we are now seeing regular news reports of falling prices on many essential products, such as loo rolls and vegetable oil. It has been good to see larger drops in inflation rates for flour, milk and eggs as retailers continue to invest heavily in lower prices for the future and locking the price of many essentials, helping the UK to deliver some of the cheapest groceries in Europe. Elsewhere, consumers will find themselves under pressure from increased health and communication costs, as inflation rates in both categories rose in May.”
It is widely reported from PA News Agency that Liberal Democrat Treasury spokeswoman Sarah Olney said: “These worse-than-expected figures show the Government is failing miserably to bring inflation down and provide relief for struggling families facing soaring bills. Home-owners now face the likelihood of even more interest rate hikes adding to their monthly mortgage payments, all while the Chancellor just sits on his hands.”
Chancellor Jeremy Hunt said: “We know how much high inflation hurts families and businesses across the country, and our plan to halve the rate this year is the best way we can keep costs and interest rates down. We will not hesitate in our resolve to support the Bank of England as it seeks to squeeze inflation out of our economy, while also providing targeted support with the cost of living.”
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