英国国家经济和社会研究所-月度CPI跟踪：7月份通货膨胀率小幅上升至2.2%（英）

NIESR

MonthlyCPITracker

InflationRisesSlightlyto2.2PerCentinJuly

MonicaGeorgeMichail

14August2024

“Today'ssmallriseininflationisdrivenmostlyduetothelargepricedropsingasandelectricitylastyearfallingoutofthecalculation.Thiswillbeaconsistentfeatureoverthenextfewmonths,withinflationhoveringaroundthe2percenttarget,beforecomingbacktotargetinearly2025.

Ontheotherhand,underlyinginflationarydynamicscontinuedtoslowwithcoreinflationat3.3percentandservicesinflationat5.2percent.Despitethelowerfigures,theseremainelevatedandmayleadtheBankofEnglandtoexercisesomecautionwithregardstofurtherinterestratecuts.”

MonicaGeorgeMichail

AssociateEconomist,NIESR

MonthlyCPITracker

August24-2-

niesr.ac.uk

NationalInstituteofEconomicandSocialResearch

Mainpoints

•Asexpected,today’sONSfiguresshowthatannualCPIinflationroseto2.2percentinJuly,afterhittingthetargetinMayandJune.Thischangefromlastmonthreflectsupwardcontributions,suchasthosefromhousingandhouseholdservices,whichwereoffsetbydownwardcontributionsfromseveralitemcategoriessuchasrestaurantsandhotels.

•Thesignificantfallinservicesinflationto5.2percentwillhavesurprisedtheBankofEnglandwhoexpectedittoremainaround5.7percent.This,alongsidethefallincoreinflationto3.3percent,isastrongsignthatunderlyinginflationdynamicsareeasing.

•Inaddition,ourmeasureoftrimmed-meaninflationmeasure(whichexcludes5percentofthehighestandlowestpricechangestoeliminatevolatility)hasfallento1.6percent,remainingaroundthelowestlevelsinnearlythreeyears.Thisfigurereflectslargeannualpriceincreasesinsomesectorssuchasrestaurantsandhotels,andrecreationandculture,whicharedrivingtheheadlinerateupwards.

•Weexpectinflationtocontinuehoveringcloseto,butabove,the2percenttargetinthecomingfewmonths,beforestabilisinginearly2025.InflationremainingclosetotargetlevelsandencouragingdropinservicesinflationmayincreasetheprobabilityoffurtherratecutsfromtheBankofEnglandinSeptember.However,strongwagegrowth,coupledwithstillhighcoreandservicesinflation,maymeantheBankcouldexercisesomecautionwithregardstofurtherratecuts.Furthermore,thepotentialincreaseintheenergypricecapinOctobercouldincreaseinflationarypressures.

•Movingforward,itwouldbeimportanttokeepaneyeonmonth-on-monthinflationfigures(‘new’inflation)todeterminetowhatextentweinflationwillreboundinthecomingmonths.

•Forabreakdownofwhatinflationisandhowitiscalculated,readourblogpost

here.

Figure1–CPI,coreCPIandtrimmed-meaninflation(percent)

Note:Ourmeasureoftrimmedmeaninflationexcludes5percentofthehighestandlowestpricechanges.Source:ONS,NIESRCalculations.

MonthlyCPITracker

August24-3-

EconomicSetting

Inourlast

GDPTracker,

wenotedthatGDPgrewby0.9percentinthethreemonthstoMay,higherthanpreviouslyexpected,andwasdrivenbygrowthinservices.AsnotedintheTracker,weexpectthatmonthlyGDPwillcontinueitsmomentuminJuneandtorecord0.6percentinthesecondquarterof2024,drivenmainlybyservicesectors.

Yesterday’sONSlabourmarketdatasuggestedthattheannualgrowthrateofaverageweeklyearnings,includingbonuses,was4.5percentinQ22024whilepaygrowthexcludingbonuseswas5.4percent.

Thesefiguresindicatethatwagegrowthremainselevatedbyhistoricalstandardsbutisgraduallysofteningafterpeakingoversummer2023(Figure2).Our

WageTracker

highlightedthatthevacancy-to-unemploymentratiostoodat0.62inJune,comparedtoanaverageof0.52in2015-2019andahistoricalaverageof0.42,indicatingthatwhilethelabourmarketcontinuestosoften,itremainssomewhattightbyhistoricalstandards.

Whilewagegrowthisexpectedtoslowtoitshistoricalaverageinthemedium-termduetothislabourmarketcooling,thecurrentpersistenceofhighwagegrowth,togetherwiththe9.8percentriseinminimumwageinApril(forthoseaged21andover)meansthatwageinflationmaybestickierinthenear-termthanpreviouslythought,andmayleadtheBankofEnglandtoremaincautiousagainstanearlyratecut.

Figure2–Averageweeklyearnings(regularpay,excludingbonuses)

Source:ONS,NIESRCalculations.

ServicessectortotalAWEannualgrowthisgraduallyslowingandhasdroppedto4.3percentinQ22024.AsFigure3belowshows,thereseemstohavebeenashiftinservice-sectortotalAWEgrowthpreandpostpandemic;theaveragegrowthrateinAWEinthissectorwas2.9percentfromJanuary2002toFebruary2020,whilefromMarch2020onwardsthisaveragehas

MonthlyCPITracker

August24-4-

increasedto5.6percent(evenaccountingfortheinitialcovid-relatedplummet).Giventhatwagesintheservicessectoraccountformostofthesector’sinputcosts,itisthemaindriverofservicesCPIinflation,whichtoday’sdatasuggestwas5.2percentinJuly,fallingfrom5.7percentinMay.

Figure3–Totalaverageweeklyearningsgrowthintheservicessector

Source:ONS

Whileelevatedservicesinflationwillbecontributingtoinflationarypersistence,itisgoodnewsthatithassoftenedsignificantlyinrecentmonths.Ifthistrendcontinuesitmaygivemonetarypolicymakersincreasedconfidencearoundcuttinginterestrates(moreonthisbelow).

InflationAnalysis

Today’sONSfiguresindicatethatannualCPIinflationincreasedabovetheBankofEngland’starget,recording2.2percentinJuly,afterhittingthe2percenttarget.Thissmallincreasefromlastmonthreflectsupwardcontributionsfromhousingandhouseholdservices,inparticulargasandelectricitypriceswhichfellbylessthantheydidlastyear.Theseweresomewhatoffsetbydownwardcontributionsfromseveralitemcategoriessuchasrestaurantsandhotels.

Thelatestdatasuggestthatannualfoodinflationfellslightlyto1.5percent,whilenegativegrowthratesinenergypriceinflationhaveslowed,recording-10.9percentinJuly.Furthermore,non-energyindustrialgoodsinflation–whichpreviouslyaveragedaround6to7percent–hasbeensofteningconsistentlysincethesecondhalfof2023,recordinggrowthofjust0.1percentinJuly(Figure5).

MonthlyCPITracker

August24-5-

Whileservicesinflationremainsthemaincontributortoheadlineinflation(Figure4),itsannualgrowthslowedfrom5.7inJuneto5.2percentinJulywhichwouldhavepositivelysurprisedtheBankofEnglandwhoforecastedthistoremainat5.7percent.Thishasresultedinafallincoreinflation,althoughitremainselevatedat3.3percentinJuly(Figure1).

Figure4–Contributionsofsectorstotheconsumerpriceindex(annualpercent)

Source:ONS,author’scalculations

NIESR’smeasureofunderlyinginflation(whichexcludes5percentofthehighestandlowestpricechangestoeliminatevolatilityandseparatethesignalfromthe‘noise’)fellfrom1.7inJuneto1.6percentinJuly.Thisfigureindicatesthatlargeannualpriceincreasesinsomesectorssuchasrestaurantsandhotels,andrecreationandculturearedrivingtheheadlinerateupwards,whileinflationisbroadlyfallinginmostsectors.

Figure5–Inflationforelementsoftheconsumerpriceindex(annualpercent)

Source:ONS

MonthlyCPITracker

August24-6-

MonetaryPolicyAnalysis

AmidstinflationfallingtotargetinMayandJune,theMPCdelivereditsfirstinterestratecutinoverfouryearsduringitsAugustmeeting,droppingratesby25basispointsto5.00percent.

Furthercutswillmainlydependonthepaceofslowingdowninservicesinflation,aswellaspotentialupsiderisks.Today’sfiguresshowingasignificantfallinservicesinflationto5.2percentwillhavesurprisedtheBankofEnglandwhoexpectedittoremainaround5.7percent.This,alongsidethefallincoreinflationto3.3percent,isastrongsignthatunderlyinginflationdynamicsareeasing,whichmayincreasetheprobabilityoffurtherratecutsfromtheBankofEnglandinSeptember.

Nevertheless,weexpectinflationtocontinuehoveringcloseto,butabove,the2percenttargetinthecomingfewmonthsduetobaseeffects,beforestabilisinginearly2025(asdiscussedbymycolleagueHuwDixon’s

blog)

.Strongwagegrowth,coupledwithstillelevatedservicesinflation,maymeantheBankcouldexercisesomecautionwithregardstofurthercuts.Inaddition,thepotentialincreaseintheenergypricecapinOctober,coupledwithpossiblegeopoliticaltensions,serveasupsideriskstoinflationinthecomingmonths.

Itwillthereforebeimportan