This morning has brought some much better news on the UK inflation front so let us get straight to it.
The Consumer Prices Index (CPI) rose by 2.3% in the 12 months to April 2024, down from 3.2% in the 12 months to March.
So we are nearly back to the Bank of England target and the position has changed in terms of us internationally.
Euro area annual inflation was 2.4 % in April 2024, stable compared with March 2024. ( Eurostat)
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in April on a seasonally adjusted basis, after rising 0.4 percent in March, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.4 percent before seasonal adjustment.
The US situation is not quite as bad as it looks and I explained this yesterday in terms of the way that Imputed Rents are inflating the numbers due to the lags in the system. But the UK is now lower than the others and I can explain why by looking at what was the big mover in this months figures.
Falling gas and electricity prices resulted in the largest downward contributions to the monthly change in both CPIH and CPI annual rates,
In fact they fell by 12% on the month so they gave the overall number quite a downwards shove. This provides scope for reflection because the quarterly changes we have we a political move by the then Prime Minister Theresa May. When energy prices were rising she was able to claim she was delaying the rise but the other side of that coin is that falls are slower. The media spent much of last year trumpeting the views of former Bank of England policymaker Adam Posen who claimed we were an inflation outlier when in fact much of it was what I have just described. Of course he left the Bank of England because he got inflation wrong. But for our purposes it was predictable that we would look bad for a while and now better. Indeed according to Cornwall Insight this will happen again in July.
For a typical dual fuel household2 we predict the July price cap to be £1,574.37 per annum. This is a fall of approximately 7% from the current price cap which was set at £1,690 per year for a typical consumer. If predictions are correct this would represent a 25% drop over the past year, with prices around £500 a year lower than July 2023.
So another shove of a bit over half of what we have just seen.
The news is such that there has been quite a quirk in the numbers this morning. We already know that CPI was 2.3%. But the inflation measure we used to target is below.
The annual rate for RPIX, the all items RPI excluding mortgage interest payments (MIPs), is 2.3%, down from 3.3% last month.
It is a quirk that they are the same and creates a wry smile after all the official propaganda against the RPI because if it is as rubbish as they claim then their new “improved” measure must also be rubbish this month.
Returning to the better news theme this is reinforced by the producer price numbers.
Producer input prices fell by 1.6% in the year to April 2024, up from a fall of 2.5% in the year to March 2024.
Producer output (factory gate) prices rose by 1.1% in the year to April 2024, up from a revised increase of 0.7% in the year to March 2024.
A much calmer picture especially if we allow for the fact that events in the Middle East ramped crude oil prices in April.
the largest offsetting upward contributions came from inputs of crude petroleum and inputs of domestic food, at 0.61 and 0.30 percentage points, respectively. The annual inflation rate for crude petroleum increased from negative 0.2% in March 2024 to 10.4% in April 2024,
In the period of early to mid-April we saw the price of Brent Crude Oil frequently above US $90 per barrel whereas as I type this it is US $82. So whilst May is not yet over it should be a downwards push in the next set of figures.
Number Crunching
There is something that I follow which was in play and on a monthly basis kept inflation higher than otherwise.
Prices overall rose this year by less than a year ago, with the main downward contributions coming from mobile phone charges, bundled telecommunication services, mobile phone applications and landline telephone charges.
That gives the impression of a decline but in monthly terms there was a 4.2% rise in this area. For overseas readers UK phone and internet charges rise annually by RPI plus 3.9% or so. Apart from the official memo that the RPI is rubbish getting mislaid there is that 3.9% boosting inflation inflation and being another example of regulatory capture. Ofcom is in fact worse than useless.
So in fact on a monthly basis it was a bigger influence than this in the official release where someone looks to have confused monthly and annual changes.
the largest, partially offsetting, upward contribution came from motor fuels, with prices rising this year but falling a year ago.
Rents
Yesterday I looked at the issues Imputed Rents have created in the US and today it is the UK’s turn.
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 3.0% in the 12 months to April 2024, down from 3.8% in the 12 months to March…..On a monthly basis, CPIH rose by 0.5% in April 2024, compared with a rise of 1.2% in April 2023.
You have no doubt spotted that this is the highest annual rate we have looked at so far. It is hard not to have a wry smile because it was designed to give a LOWER annual rate. So what has happened?
One factor is the use of a stock or “bath” of rents of 14 months which means by definition that the numbers are out of date. This is very misleading for an April 2024 number which has elements from back in 2022 in it. But they also made a mess of measuring rents.
Average UK private rents increased by 8.9% in the 12 months to April 2024 (provisional estimate), down from 9.2% in the 12 months to March 2024.
It is quite extraordinary the incompetence here which goes as follows. Rents surged as inflation picked up going into double-digits for market rents which the official series missed. Later they began to pick this up and then they discovered that their estimates were between 2 and 3% too low.
So they are recording record rent rises ( or near to them) just as the actual market rents have been seeing a fall in the annual rate of inflation. I will discuss this more tomorrow at the Better Statistics conference.
Comment
There is a fair bit of better inflation news out this morning. But let me give you a perspective from a place which should be hanging its head in shame. Whilst the Bank of England morning meeting will no doubt echo to the sound of those slapping the Governor on his back and praising his “masterly action” on inflation the reality is as follows. On the way up they told us a 0.1% interest-rate was appropriate for 4% inflation and now they tell us a 5.25% interest-rate is appropriate of 2.3% inflation. Make that make sense!
On the other side of the coin one essential area is still struggling and that is food prices. They rose by 0.4% in April and only one of the categories fell ( fruit by 0.3%). So this issue has not yet gone away and remember this is on top of the previous rises. Furthermore there was this in the producer prices release.
the annual rate for domestic food increased from negative 2.2% to 1.1% between the same periods, partly because of rising fish prices. ( Input prices)
Notayesmanseconomics's Blog 
Inflation fell to 2.3% in April yes? Err in who’s universe would that be? Someone who lives in a cave that doesn’t have gas or electricity, a car or doesn’t need to buy food obviously. Shall we just call it the Caveman inflation index for short?
Our cost of living is now soaring due to highinflation AND higher indirect taxes.
Food inflation up nearly 50% since covid, car insurance? I’ve just been quoted £1,000 to insure a Lexus, retired, over 25 years no claims, 3,000 miles a year driven, so no commuting so less risk of accident, clean licence for 46 years, a little research discovered the main reason was the CANbus vulnerability(Toyotas similarly affected), where a thief can pull back the front bumper and plug into a socket on the headlight assembly which is connected to the cars main computer, allowing the security system to be overriden, central locking defeated and ignition as well, since the other main cost of insurance is to cover out of control car thefts and car part thefts, uninsured drivers, crash for cash – it can be seem that all these are due to the de-criminalisation of these crimes by the government – so in effect another indirect tax.Young kids at work driving the latest hot hatches pay similar premiums – to put it into perspective.
Ditto the other cost of subsidising the government borrowing and the housing bubble with insurance companies buying gilts at guaranteed losing prices, hence the need to boost premiums to cover these losses, and there is another hidden tax, add on the green/climate change polices that have caused gas and electricity prices to be double what they should be – another hidden tax, if you add on those hidden taxes what is the rate of inflation then?
Even if inflation has come back to 2.3%, all the above increases in prices will never go away, those food prices and insurance premiums are now permanent, and will only move higher from here. I guess inflation at the moment for the average person in this country is somewhere between 10-15%, overall, and like the 1970’s, it may be abating, but it comes in waves, just when you think it has died down and gone away, it will surge back due to the delay in the money creation by the Bank of England and the government feeding through to the prices we see every day.
Like the light we see now is generated from the sun that occurred in a hydrogen fusion flare over 8 minutes ago, the inflation we are seeing now is as a result of stimulus from 18mths to 2 years ago.
Bang on KEVIN!
I thought you’d like the reference to the sun:)
And the stimulus continues and is likely to accelerate, as Buzz
Lightyear would say to the universe and beyond.
JRH
Failures in measuring rents?
What about the failures in measuring shrinkflation?
What about the failures in measuring the the effects of using poorer quality ingredients?
What about the failures in measuring the effects of cherry-picking baskets, like scones in, potatoes out?
What about the failures in measuring the effects of rebranding precisely the same products at higher prices?
Inflation, AND I MEAN REAL INFLATION as it affects ordinary folk like me, is nearer 23% than 2.3%
The size of some products has reduced to the point that if it weren’t so serious it would be hilarious, some packet individual sizes that are now so small they probably couldn’t get any smaller, would include MCVities Gold Bars, Cadbury’s Creme Egg, Cadbury’s Wispa multipack, other massive shrinks include:
Pringles 200g to 185g, Lurpak 250g to 200g,Whiskas 100g to 85g,Colgate toothpaste 100g to 75g, Penguin and Club Biscuits 8 down to 7, CVities Digestives 336g to 304g,Richmond sausages 336g to 304g,Magnum Ice creams 110ml to 100ml,Quality Street 200g to 185g,Tescos 1.5KG lASAGNE -beef content 23% to 19%,Listerine mouthwash 600ml to 500ml,Tescos Finest Sausages pork was 97% now 90%, Tesco’s Tex MEx Enchiladas chicken was 27% now 20%,
So true. I had a penguin recently for the first time in decades. It was over in two bites. Packets of crisps are tiny. And they try and gaslight us by claiming they’re trying to make us healthy.
YUP!
Force everyone to cut down on crisps & chocolate, then cause us to have to work every hour we can to survive, so that we don’t have time to shop or cook, instead relying on super-healthy, ultra-processed, convenience foods, which we can just chuck in the oven when we get home…
Hi Shaun
Great article as always.
I had a sneaking suspicision CPI wouldnt play ball this morning. The pliant media were all expecting 2.1% and then they could bang on about an interest rate cut in June. But it didnt really pan out that way. They will now be lobbying for a cut in August,
Like Kevin has mentioned massive increases in bills starting to filter through.
Water companies desperate to screw the consumer over with a 90% increase in bills. I expect Offwat to gaslight us and say 90% is bad, but we should be grateful for 45%.
After having vegetable oil for ages we bought some olive oil recently. It was £7.80. You can get a decent bottle of wine for less.
I think inflation will stumble around for a bit and then head up. There is still too much gment money sloshing around the economy. 20.5 bn deficit spending in April alone.
Bailey might be stuck between a rock and a hard place soon. Desperate to bail out the housing market, but also to appear ‘tough’ on inflation. Did I read somewhere that FLS had been extended again?
Interesting times.
Hi Anteos and thank you
In terms of an interest-rate cut they will have some time to see the response to the ECB cut it has strongly hinted at for June. So assuming it cuts by 0.25% on the 6th of June they will have a fortnight to watch what the Euro does.
I was luckier when I bought some olive oil a few months back but around £6 felt a lot more than last time. This is a general issue as I saw someone posting prices from Aldi UK and Aldi Germany and it was the latter which was more expensive.
Cheers for the tip on the FLS as I had missed that. I guess we are about to find out what “small number” means?!
https://www.bankofengland.co.uk/markets/market-notices/2024/may/tfsme-market-notice-17-may-2024
Cadbury’s quayle’s eggs.
It is also my view that most one-off purchases be excluded from inflation figures, or, at least removed from core prices.
If you buy something like, say, an air-fryer, (I chose that because I know it has just been included in the basket) then the price at the time of purchase is important, but the price tomorrow or yesterday is irrelevant, because you didn’t buy one yesterday, & you won’t tomorrow.
Sure, the way that the prices of these items may be useful to know, but they are only included because many items of a particular technology level, tend to drop in price as the tech level ages.
I think we need a very real discussion about the very purpose of generating inflation figures, & the relative importance of the different areas for which they generate information.
Is it not well past time for us to split up inflation figures, for example, an investment inflation figure, where the likely rises in income generated help with the investment in different areas of the economy?
to have a benefits inflation figure whereby only essentials like food, rent, fuel & clothing are considered?
to have an overall inflation figure, like today’s, but free from the chicanery of trying to keep benefits upgrades down, & so, hopefully, more likely to give a more accurate picture of gdp & where it’s going??
Hi therrawbuzzin
I take your point but remember these are aggregate numbers so there will be a stream of people buying air fryers. For individual groups there is need for more targeted inflation numbers and that is what the new Household Cost Indices are for. They can be broken down into tenths or deciles and the lowest one is much less likely to have one-off items.
I see the MSN news is carrying articles from the Mail & the Express about keeping a food reserve of at least 3 days, for when services are “interrupted”.
That’s from the Deputy Prime Minister Oliver Dowden; I eagerly await the announcement from Mel Stride at the DWP of the extra three days’ payment to means-tested benefits recipients, so they too can comply.
The first of my first-early tattie are just showing their flower stems, which means new tatties in 2-3 weeks. YUM!
Interruption? Translation worldwide co-ordinated banking failure and closure until further notice, centranl baks having emergency meetings with international finance ministers and treasurers to eventually provide the fix – the financia reset combined with introduction of CBDC and eventually UBI,that had already been prepared, where did I hear that one before?……………..
Fed minutes at 7pm our time then more importanatly, nVidia report after the closing bell tonight, will determine the near term direction of the market.
No KEVIN!
They love us.
They are honoured to be servants of the public.
Making our lives better, that is their only motivation for their work.
Just looked into reasons why he gave that warning, and he said it was due to the possibility of attacks by out enemies! Well according to the MSM our only enemies are the “Far Right”(ordinary people concerned about the effects of unlimited immigration is having on our country) and of course Putin, the reason and justification for our never ending spending on “defence”, well lets look into that word – defence – meaning the repelling of a possible attack? How many times has Russia attacked this country – well that would be never, how many times have our armed forces joined in attacks by the US on countries in the middle east that have never done any thing malicious towards us or threatened us? well that would be every invasion and incursion in the last the last 30 years wouldn’t it? So how is that vast expenditure justified if it it always referred to as for “defence”????
IF you consider the US has also never been attacked by an outside force, lets forget 9/11 since there is ample evidence that it was co-ordinated by the US government itself to justify the “war on terror”, it almost begins to look like it is a centrally planned policy of deficit funded wars probably co-ordinated by the same people who want to introduce a society where “you will own nothing and be happy”
Planned by our enemies? well to me that would be our government, who are not working in our interests, but for those who wish to impliment the above dystopian nightmare on us.
IF the warning turns oUt to be correct, they are ready to move to the next stage of their plan.Who do you think the majority of the UK public will believe? The MSM response blaming Putin,China or N.Korea or the likes of me-” A RIGHT WING, FAR RIGHT RACIST”spelling it out on a blog that hardly anyone sees?
Kevin: Strangely, those who state that Putin is a danger to the whole of Europe, also state that his military is so useless it has failed to take the whole of Ukraine in 25 months!!! (This is despite Putin stating, on numerous occasions that his actions were only to protect ethnic-Russian Ukrainians in the east of Ukraine)
I’ve said it before many times, “Liars cannot join up their thinking & eventually contradict themselves.
I might start growing my own potatoes considering what they cost nowadays! (and don’t get me started on the quality – you have to throw half of them away).
It’s not too late to get some in now, but I’d be tempted to choose blight-resistant varieties at this date.
For my part, I should, as stated above, be able to start taking new potatoes in 2-3 weeks, what I have left in storage is definitely past its best, but edible in an emergency (this is not unexpected) & I have three jars of home-canned spuds & some frozen home-grown portions of bubble-&-squeak, which i hugely like.
something else you might find of concern:
Scientific Report UK Storms (mcusercontent.com))
In this first paper, look who the reviewing is being done by: colleagues of the authors all working at the same institutes!!!
These Scientists Say Cosmic Ray Radiation Has an Effect on Climate Change : ScienceAlert
My comment is awaiting moderation
I have rescued it from the waiting room…
Hello Shaun,
its going to get crazy – general election announced
water rates up by 92% after mine have gone up 25 % in the past 2 years
yes the world is mad , its bi polar !
Forbin
Hi Forbin
It was not at little bizarre when on a day when it has been raining cats and dogs the Prime Minister came out and declared that. It sort of summed it up as “Things can only get better” nearly drowned him our!
As to the Water companies they have been a scandal in plain sight. Will Labour nationalise them? The issue with that is company debt suddenly becomes national debt……
Great blog as usual, Shaun.
The UK CPI inflation rate is also now below the Canadian inflation rate, which also moved down in April, but only from 2.9% in March to 2.7%. Well done, Britain!
I was very pleased to receive a message from the ONS CPI Team this morning that they have implemented my suggestion to change Figure 9 of the consumer prices inflation to include a link to the BLS R-HICP homepage in the first footnote for the chart. The previous reference in that footnote was dated, so this should be helpful to readers of the pub who are curious about the US HICP. Regrettably, the publication of the April update of the US HICP, which would normally be available before today, has been delayed. In March it was at 2.4%, considerably lower than the comparable UK CPI inflation rate, but there is a good chance its April inflation rate will be higher than the UK CPI inflation rate, given that the CPI-U inflation rate for the US showed a considerable increase from March to April.
Best of luck to you in your presentation at tomorrow’s conference, “Inflation 2024: Are We Using the Right Measures?” I certainly hope that you are persuasive, as you deserve to be.
Hi Andrew and thank you for the good wishes for my speech tomorrow.
Also thank you for the reminder about the US HICP numbers and why I could not find them earlier! A shame in that they would be useful for tomorrow. Continuing the international theme I remembered later that the UK inflation rate is presently below Japan which is not often true.
“Continuing the international theme I remembered later that the UK inflation rate is presently below Japan which is not often true.”
…& neither is it this time.
Sorry, Alan. Japan’s inflation rate is 2.7% for April 2024 is it not? Isn’t that higher than the UK CPI inflation rate of 2.3%. Of course, the CPIH inflation rate is higher than the Japanese rate at 3.0%, and it includes imputed rents, like the Japanese CPI. Is that what you mean? I would be grateful if you could expand on your thoughts.
my comment was not about the relative figures, it was about truth.