Inflation falls across the economy

Date : 20 July 2023

UK “all items” inflation fell more than expected in June, to +7.9% year-on-year, by the CPI method. Food inflation fell from +18.3% in May to +17.3% in June, which is in line with IGD’s latest forecasts.

The latest inflation release from ONS shows that overall inflation in the UK has fallen to +7.9%. This is a significant fall of 0.8 percentage points.

Continued price reductions for motor fuel were the largest downward contributor and, encouragingly, there were no major upward contributions, suggesting that slowing inflation is broad-based.

“Core” inflation, which excludes the most volatile items such as energy, food, alcohol and tobacco, was +6.9%, down from +7.1%. The previous month’s result was the highest rate for 30 years, however.

A modest fall in the “core” inflation rate will come as a relief to policymakers and the Bank of England. This may be an early indication that strong wage rises are not being embedded into the economy.

Any future upward movement in the services and “core” inflation, would suggest that we are moving towards an environment where wage rises are driving price rises.

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UK food and drink prices in June 2023 were up +17.3% year-on-year, by the CPI method, a fall of 1 percentage point from the previous month.

This remains in line with our latest food inflation forecasts. Our forecasts indicate that inflation has now peaked and will decline slowly over 2023. In December 2023 food inflation is predicted to be between 8% and 10%.

To read our full analysis on what is next for food inflation and how consumers are faring, download our latest Viewpoint report “Persistent inflation, politics and labour challenges

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Source: ONS and IGD calculations, July 2023

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