UK Consumer Price Inflation Hits Record Low in June 2023

Key Points:

·       In June 2023, the Consumer Prices Index including owner occupiers' housing costs (CPIH) recorded a 7.3% increase over the previous 12 months, a slight decrease from May's 7.9%.

·       On a monthly basis, CPIH saw a 0.2% rise in June 2023, compared to a 0.7% increase in June 2022.

·       The Consumer Prices Index (CPI) experienced a 7.9% increase over the 12 months leading up to June 2023, down from May's 8.7%.

·       Monthly, CPI rose by 0.1% in June 2023, as opposed to a 0.8% rise in June 2022.

·       The decline in motor fuel prices had the greatest impact on the decrease in both CPIH and CPI annual rates, while food prices rose in June 2023, albeit at a slower pace than in June 2022, contributing to a reduction in the inflation rates.

·       There were no significant factors counteracting the overall rate change.

·       Core CPIH, which excludes energy, food, alcohol, and tobacco, increased by 6.4% over the 12 months leading up to June 2023, slightly down from May's 6.5%. May's rate was the highest in over three decades. The annual rate of CPIH goods slowed from 9.7% to 8.5%, while the CPIH services annual rate remained unchanged at 6.3% from May.

·       Core CPI, excluding energy, food, alcohol, and tobacco, increased by 6.9% over the 12 months leading up to June 2023, a decrease from May's 7.1%, which was the highest rate since March 1992. The CPI goods annual rate slowed from 9.7% to 8.5%, while the CPI services annual rate eased from 7.4% to 7.2%.

Annual CPIH and CPI inflation rates eased between May and June 2023

CPIH, OOH component and CPI annual inflation rates for the last 10 years,

Source: Consumer price inflation from the Office for National Statistics

Consumer price inflation rates

In the 12 months leading up to June 2023, the Consumer Prices Index including owner occupiers' housing costs (CPIH) witnessed a 7.3% increase, showing a slight decline from the previous month's 7.9% and a decrease from the peak of 9.6% reached in October 2022. Based on our indicative modelled consumer price inflation estimates, the October 2022 rate was the highest in over four decades, with the CPIH National Statistic series commencing in January 2006. The rate observed in June 2023 was the lowest since March 2022.

The decrease in the annual rate between May and June 2023 can be attributed to a 0.2% monthly price increase, compared to a 0.7% rise during the same period the previous year.

Similarly, the Consumer Prices Index (CPI) experienced a 7.9% increase over the 12 months leading up to June 2023, down from May's 8.7%, and a decrease from the peak of 11.1% in October 2022. Our indicative modelled consumer price inflation estimates suggest that the October 2022 peak represented the highest annual inflation rate since 1981, with the CPI National Statistic series beginning in January 1997. The rate observed in June 2023 was the lowest since March 2022.

The easing in the CPI annual rate between May and June 2023 was the result of a 0.1% monthly price increase, compared to a 0.8% rise during the same period the previous year.

The primary factors influencing the annual inflation rates for both CPIH and CPI align where applicable. However, the owner occupiers' housing costs (OOH) component, which accounts for 16.0% of the CPIH, primarily drives the differences observed between CPIH and CPI inflation rates.