NIESR react to the latest ONS CPI inflation statistics

20 Sep 2018 12:35 PM

According to ONS figures released this morning, consumer price index inflation rose by 0.2 percentage points to 2.7 per cent in the year to August 2018. Our new analysis of the prices of the 136,386 goods and services included in the index this month suggests that this increase was driven by relatively large increases in a small number of items. This suggests that the pickup in headline inflation is less likely to persist than if price increases had been more widespread.

Main points

• Underlying inflation was unchanged at 1 per cent in the year to August 2018, 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 1.4 per cent and lowest in Yorkshire and the Humber at 0.5 per cent in the year to August 2018 (table 1).
• 21 per cent of goods and services prices changed in August, implying an average duration of prices of 4.8 months: 4.9 per cent of prices were reduced due to sales, which is the lowest for the month of August since 2013; 4.1 per cent fell for other reasons; and 12 per cent were increases, which is the highest for the month of August since 2011 (figure 2).
• The usual relationship between current trimmed mean inflation and future CPI inflation implies CPI inflation of 2.1 per cent in the year to August 2019.

Dr Jason Lennard, Senior Economist, said: “CPI inflation increased in the year to August 2018. Our analysis of the prices of the 135,000 goods and services included in the CPI basket suggests that this was due to a relatively small number of big price changes. Our measure of trimmed mean inflation, which excludes a fraction of the most extreme price changes, was unchanged at 1 per cent. However, while this measure of underlying inflation is low at the national level, there are regional differences, standing highest in London at 1.4 per cent and lowest in Yorkshire and the Humber at 0.5 per cent.”

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

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

 

Notes for editors:

For further information and to arrange interviews, please contact the NIESR Press Office:
Paola Buonadonna on 020 7654 1923 / p.buonadonna@niesr.ac.uk

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