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NIESR: Monthly CPI Tracker – Drop in CPI Inflation Expected to be Temporary

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Drop in CPI Inflation Expected to be Temporary

The consumer price index inflation rate declined to 1.3 per cent in the year to December 2019, as per data released by the ONS. Our new analysis of 129,516 locally-collected goods and services indicate that inflation in the restaurants and hotels and clothing and footwear categories decreased in the twelve months to December 2019. Consumers have also benefitted from lower inflation on food and non-alcoholic beverages during the festive season. Underlying inflation, which excludes the most extreme price changes, grew at 0.8 per cent in December, down from 1 percent in November. This is consistent with the Bank of England’s target of 2 per cent in the 12 months to December.

Main points

  • Underlying inflation decreased by 0.2 percentage points to 0.8 per cent in the year to December 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 at 1.3 per cent and lowest in the South West at 0.6 per cent in the year to December 2019 (table 1).
  • 17.5 per cent of goods and services prices changed in December, implying an average duration of prices of 5.7 months. 5.4 per cent of prices were reduced due to sales, 3.1 per cent fell for other reasons and 9.1 per cent were increases (figure 2).
  • The historical relationship between current trimmed mean inflation and future CPI inflation implies CPI inflation of 2 per cent in the year to December 2020.

Janine Boshoff, Economist, Macroeconomic Modelling and Forecasting, yesterday said:

“Headline CPI inflation declined to 1.3 per cent in the year to December 2019, down from 1.5 per cent recorded in November. Our analysis of approximately 130,000 goods and services included in the basket, indicates that consumers benefitted from lower inflation in clothing and footwear, and restaurants and hotels. Our measure of underlying inflation, which excludes extreme price movements, decreased by 0.2 percentage point to 0.8 per cent in December. Underlying inflation decreased in 11 regions of the UK. On this basis, we expect CPI inflation to settle around the Bank of England’s target of 2 per cent in the coming year.”

Please find the full commentary in attachment

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Notes for editors:

For further information and to arrange interviews, please contact the NIESR Press Office:
Luca Pieri on 020 7654 1931 / l.pieri@niesr.ac.uk  

NIESR aims to promote, through quantitative and qualitative research, a deeper understanding of the interaction of economic and social forces that affect people's lives, and the ways in which policies can improve them.

Further details of NIESR’s activities can be seen on http://www.niesr.ac.uk or by contacting enquiries@niesr.ac.uk . Switchboard Telephone Number: +44 (0) 207 222 7665

 

Original article link: https://www.niesr.ac.uk/media/press-release-monthly-cpi-tracker-drop-cpi-inflation-expected-be-temporary-14091

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