NIESR Monthly CPI Tracker - Core Inflation Overtakes Headline CPI
16 August 2023
However, measures of underlying inflation remain high: core CPI rose by 6.9 per cent in the year to July, unchanged from June; annual services CPI rose from 7.2 per cent in June to 7.4 per cent in July; and NIESR’s trimmed-mean CPI estimate remains high at 8.6 per cent, though having fallen from 9.4 per cent in June. [...] Altogether, these data indicate that, despite the welcome fall in the headline rate, we have yet to see a turning point in the underlying rate of inflation, which remains stagnant at around 7 per cent.” Paula Bejarano Carbo Associate Economist, NIESR Monthly CPI Tracker August 23 - 2 - Main points • Annual consumer price inflation was 6.8 per cent in July, down from 7.9 per cent in June. [...] • Though this fall in the CPI rate was expected, given that the Ofgem energy price cap significantly decreased on 1 July, the latest figure of 6.8 per cent represents a downward surprise in headline inflation relative to the forecast in NIESR’s Summer UK Economic Outlook. [...] That said, we view the risks to inflation as tilted to the upside, given the latest data on underlying inflation as well as key risks to our forecast (such as a possible escalation of Russia’s war in Ukraine or the risk of inflation expectations becoming embedded in household/firm behaviour). [...] Figure 3 – Total average weekly earnings in the services sector Source: ONS NIESR’s measure of underlying inflation, which excludes 5 per cent of the highest and lowest price changes, fell to 8.6 per cent in July from 9.4 per cent in June.