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NIESR reacts to the latest ONS CPI inflation statistics

According to figures released last Wednesday by the ONS, consumer price index inflation increased by 0.1 percentage points to 1.9 per cent in the year to February 2019.

Our new analysis of 131,481 goods and services prices included in the index this month suggests that the uptick in inflationary pressure is widespread across items and regions.

Main points

  • Underlying inflation increased by 0.1 percentage points to 0.8 per cent in the year to February 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 London at 1.1 per cent and lowest in Yorkshire and the Humber at 0.6 per cent in the year to February 2019 (table 1).
  • 20.9 per cent of goods and services prices changed in February, implying an average duration of prices of 4.8 months. 4.6 per cent of prices were reduced due to sales, 4.2 per cent fell for other reasons and 12 per cent were increases (figure 2).
  • The historical relationship between current trimmed mean inflation and future CPI inflation implies CPI inflation of 1.9 per cent in the year to February 2020.

Dr Jason Lennard, Senior Economist, said: “CPI inflation increased by 0.1 percentage points to 1.9 per cent in the year to February 2019. Based on our analysis of 130,000 goods and services in the basket, we found that the uptick in inflation was widespread. Our measure of underlying inflation, which excludes extreme price movements, increased by 0.1 percentage points, which suggests that the increase in headline CPI inflation is not driven by outliers but is common across goods and services. At the regional level, underlying inflation increased in 9 out of 12 regions, standing highest at 1.1 per cent in London and lowest in Yorkshire and the Humber at 0.6 per cent.”

This analysis builds on the work presented in the National Institute Economic Review, which constructs a measure of trimmed mean inflation based on the goods and services prices that underlie the consumer price index.

Our next analysis of consumer prices will be published on 17 April.

Figure 1. Inflation: CPI and trimmed mean

Note: Our measure of trimmed mean inflation excludes 5 per cent of the highest and lowest price changes. The level of trimmed mean inflation is typically lower than CPI inflation due to differences in how the largest price changes are treated and to how the prices are weighted.

 

Figure 2. Decomposing price changes: Decreases due to sales, decreases due to other reasons and increases

Note: Our measure of trimmed mean inflation excludes 5 per cent of the highest and lowest price changes. The level of trimmed mean inflation is typically lower than CPI inflation due to differences in how the largest price changes are treated and to how the prices are weighted.

Notes for editors:

For further information and to arrange interviews, please contact the NIESR Press Office:
Luca Pieri on 020 7654 1931 / p.buonadonna@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

ONS Statistics:  Consumer price inflation, UK: February 2019

Original article link: https://www.niesr.ac.uk/media/niesr-press-note-%E2%80%93-niesr-reacts-latest-ons-cpi-inflation-statistics-released-wednesday-13678

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