CPI Inflation figures for June 2023

The Consumer Prices Index including owner occupiers’ housing costs (CPIH), a widely tracked indicator of inflation, recorded an annual increase of 6.4%. This figure marked a distinct deceleration from the previous month’s rate of 7.3% and an even more significant decline from the peak of 9.6% observed merely nine months ago in October 2022. Delving deeper into the data, a month-on-month comparison revealed that prices contracted by 0.3% in July, a striking contrast to the 0.6% increase registered in the same period a year earlier.

The Consumer Prices Index (CPI), an alternative measure often used to gauge inflation, mirrored the trend depicted by the CPIH. It reported an annual inflation rate of 6.8% in July 2023, down from the preceding month’s 7.9%. This downward trajectory was further highlighted by a 0.4% dip in prices on a monthly basis, in stark comparison to the 0.6% rise recorded in July 2022. These figures collectively paint a comprehensive picture of a moderating inflation rate, signalling potential shifts in the economic landscape.

At the heart of this inflation moderation lay several key contributing factors. One of the primary drivers was the considerable reduction in gas and electricity prices, making a notable dent in the annual inflation rates for both CPIH and CPI. The energy sector’s cascading influence on broader economic dynamics became particularly evident during this period. Moreover, while food prices did experience an increase in July 2023, the pace was notably slower compared to the previous year, serving as another factor dampening the overall inflation rates.
Zooming in on specific sectors that influenced this inflation trend, the data reveals some interesting insights. The hotels and passenger air transport sectors emerged as pivotal contributors that countered the broader downward trend. These sectors exerted upward pressure on the inflation rates, partially offsetting the moderating influences observed elsewhere. This dual-force scenario underscores the complex interplay of various economic components that can either amplify or mitigate the overall inflationary pressures.

Delving deeper into the inflation data by considering core inflation categories, which exclude volatile elements such as energy, food, alcohol, and tobacco, offers further insights. The CPIH’s core inflation exhibited unwavering stability, with an annual increase of 6.4% both in June and July 2023. Within this stability, an intriguing contrast emerged between the goods and services components. While the goods component experienced a notable deceleration from 8.5% to 6.1% annually, the services component demonstrated a subtle uptick from 6.3% to 6.5%. This divergence suggests a nuanced interplay between different sectors of the economy.

Similarly, core CPI, which is another vital indicator, maintained its course with a consistent annual increase of 6.9% in July. This figure mirrored the rate observed in the previous month, thereby underlining the resilience of this core measure amidst the evolving economic landscape. Just like CPIH, core CPI also exhibited the same pattern of stability, with the goods and services segments both holding steady at 6.9% annual increases.

Diving into the sectors that contributed to these inflation trends reveals a narrative of contrasts. The housing and household services sector, driven predominantly by the decrease in gas and electricity prices, emerged as the most influential downward force on the annual CPIH and CPI inflation rates. This is indicative of how changes in energy markets can significantly shape broader economic trends. In contrast, the food and non-alcoholic beverages segment experienced a moderation in inflation rates, with reduced price growth in categories such as milk, bread, and cereals.

In the transport sector, an interesting pattern unfolded. This sector displayed negative annual rates for two consecutive months, largely due to the decline in motor fuel prices. This trend not only underscores the volatility of certain market segments but also highlights the cascading impact of such fluctuations on broader inflation figures. Conversely, the restaurants and hotels sector, buoyed by the resurgence in accommodation services, contributed positively to the overall inflation rates.

This intricate web of factors and sectors underscores the multifaceted nature of inflation dynamics. It offers a glimpse into how various economic components, ranging from energy prices to consumer spending patterns, can collectively shape the trajectory of consumer price levels. The broader moderation in inflation rates provides valuable insights into the underlying economic currents, shedding light on the intricate relationship between supply chains, energy markets, and consumer behaviours.

As the global economic landscape continues to evolve, this nuanced analysis of inflation data takes on even greater importance. Policymakers, businesses, and consumers all rely on such insights to make informed decisions that can potentially influence economic outcomes. By studying these inflation trends, stakeholders can better understand the shifting dynamics of the economy and position themselves for success in an ever-changing world.

Further reading: ONS