According to Societe Generale economist Sam Cartwright, the UK’s headline inflation rate remained unchanged at 2.8% year-on-year in May. The figure came in slightly below both market expectations and the Bank of England’s forecast published in its April Monetary Policy Report.
Meanwhile, core inflation, which excludes more volatile items such as food and energy, edged slightly higher to 2.6%.
Cartwright noted that stronger inflation in the services sector and higher fuel prices were balanced out by softer food and goods inflation, helping to keep the overall headline figure stable.
Services inflation increased by 0.5 percentage points to 3.7% year-on-year. Although this marked a noticeable rise, it still came in slightly below the Bank of England’s earlier projections.
Several temporary factors contributed to the increase in services inflation. One major factor was a positive base effect linked to corrections made by the Office for National Statistics (ONS) regarding last year’s overestimated increase in Vehicle Excise Duty. This adjustment alone added around 0.25 percentage points to services inflation.
Another contributor was the rebound in airfares after weaker pricing during the Easter period in April. The recovery in airline ticket prices added approximately 0.15 percentage points to services inflation. Higher sea transport costs also contributed modestly to the increase.
Despite the rise in services inflation, weaker price pressures in food and consumer goods helped offset the impact, keeping overall inflation relatively stable in May.
