The latest UK inflation data published this morning shows annual CPI inflation at 0.1% and RPI at 1%. Both are increases over the last month. However it should be remembered that this result was expected as prices dropped slightly last May and those falls dropped out of the index today. In contrast this May, they rose 0.2% – partly an effect of rising petrol prices (now 121p – up from 115p in Feb), some food price rises (eg diary spreads) and some quirks due to the timing of Easter affecting the cost of flights.
But the latest figures provide some support to the view that we have seen a low in inflation and the direction is now higher – see graph below. Certainly as the year progresses the falls in food and fuel prices will gradually drop out of the calculation. Furthermore, underlying inflation is 1.1% and services inflation is up to 2.3% again. It is prices of things like restaurants/hotels and education that are still pushing service inflation upwards.
These figures are also consistent with the trends in Europe where inflation was also up a similar amount to 0.3% in May. Indeed Germany’s own inflation stats out this morning, show it rising at 0.7% year-on-year now.
You can read the full ONS report here.