Consumer Prices Index (CPI)
The Office for National Statistics (ONS) has this morning released Consumer Prices Index (CPI) inflation figures for May 2023 and it has stayed the same at 8.7% pa when compared to April 2023.
Last month, most commentators were expecting a bigger fall that the 1.4% to 8.7% pa and this month, most were forecasting falls to below 7% pa given fuel prices had fallen 13.1% since May 2022 but food and non-alcoholic beverages remain stubbornly higher than a year ago at +18.4% pa.
Recreation and culture went up even faster, rising to +6.84% pa from 6.4% pa in April. All the expense item prices in the following table increased in the year to May 2023 when compared to April 22 to April 23, so they are heading in the wrong direction.
April 2023 |
May 2023 |
|
Alcohol and tobacco |
9.1% |
9.2% |
Clothing and footwear |
6.8% |
7.0% |
Owner occupiers' housing costs |
4.0% |
4.2% |
Health |
7.2% |
8.5% |
Communication |
7.8% |
9.0% |
Recreation and culture |
6.4% |
6.8% |
Restaurants and hotels |
10.2% |
10.3% |
What does this tell us?
Our mobile telephone and broadband providers are still perhaps pushing their prices up even higher than they should be. Most people have deals now at 3-5% + CPI increases each year. Given the warmer weather coming and the coronation bank holidays etc., we have also spent more on ‘booze’, having fun, eating out and going away on a break.
Old Inflation Measure - Retail Prices Index (RPI)
The old measure of inflation RPI, an arithmetical mean of the average prices of a basket of household spending (rather than the geometric mean for CPI), marginally fell 0.1% to 10.3% pa from 10.4% pa (April 2023).
Comment
This puts even more pressure on the Bank of England to increase interest rates at a faster rate than expected. Even if inflation fell in May, we were all expecting the Bank of England to increase rates tomorrow by 0.25% to 4.75% but given interest rates in the US have been held at a range of 5.0% to 5.25% pa this month. Will the Bank of England increase even more by 0.5% to 5.0% pa? We think they should, but we suspect they will not and try to avoid recession as well as putting the property market into reverse.