UK Inflation Drops Below 10%, As Energy Costs Ease
|in:Economy in Brief
Today’s UK CPI data for April revealed a sizeable drop in the headline inflation rate but the decline was not as big as forecasters had expected. And that was in part because core inflationary pressures continued to climb with services inflation now at more than 30-year highs.
The key highlights of this report were as follows: • UK consumer price inflation dropped to 8.7% in April from 10.1% in March. While this drop was sizeable, it was not as large as expected. The consensus forecast, for example, was centred on a headline inflation rate of 8.3%. • The headline decline in inflation was the result of a big drop in energy price inflation. Electricity and gas prices specifically contributed 1.42 percentage points to the fall in annual inflation in April as last April’s rise dropped out of the annual comparison. The decline was result of the UK’s Energy Price Guarantee. The energy price cap surged a year ago as wholesale prices surged following Russia’s invasion of Ukraine. • Core inflation (which excludes energy, food, alcohol and tobacco) climbed by 6.8% in the 12 months to April, up from 6.2% in March and the highest rate since March 1992. • Food price inflation remained extremely high, rising by 19.2% yr/yr in March down only modestly from 19.1% in April. The CPI services index also increased by 6.9% in the year to April 2023, up from 6.6% in March, placing it at its highest level since March 1992.
In conclusion, while the big drop in headline inflation may mark a turning point in the UK inflation cycle, the news that core inflation has continued to climb will not be well received at the Bank of England.
Kritika JainAuthorMore in Author Profile »
Kritika joined Haver Analytics as a Junior Economist in August 2022. She writes commentary on UK macroeconomic trends and provides client support of Haver’s data content and proprietary software.
From 2019 to 2022 Kritika worked in Financial Accounting and Capital Markets. Prior to working in financial services, she was a research assistant at Frontier Economics within the public policy practice and has also interned at HM Revenue and Customs.
Kritika holds an MA in Economics from the University of Manchester and a BA in Economics from India.