The official rate of inflation in the UK has edged up for the first time since November 2017. The Consumer Price Index (CPI) measure of inflation rose by 0.1% from 2.4 to 2.5% in the three-month period to July; the rate had been steady at 2.4% since late last year. The upturn has been blamed on increase costs for computer games and the cost of transport.
As we know, there are lies, damned lies and statistics, so it will probably not come as a surprise to note that another measure of inflation, the Retail Price Index (RPI), eased slightly to 3.2%. In fairness, the two measures reflect a different set of standards, but it merely highlights that “true inflation” is captured by neither figure. True inflation would be an averaged index that reflects the extensive range of goods and services which consumers buy with a weighting to purchasing frequency – it explains why many people in the UK believe that the true level of inflation is significantly above the official level as they have less money left over from making normal purchases than in the past.
To the annoyance of many commuters, the RPI figure is the one used to set inflation plus rises in the cost of regulated train fares, but even though it has declined slightly, it is still well above wage inflation meaning that price rises for season tickets and other train fares will restrict disposable income still further when the prices rise. Officially, wage growth is currently above inflation (on the CPI measurement) at 2.7% for the three months to June (the figure excludes bonus payments).
Whilst transportation and computer games cost more, there was a seasonal decline in the price of clothing. The price of raw materials to manufacturers picked up by 10.9% over the July 2017 figure with higher crude oil prices being blamed, in part, for the hike.
The Bank of England targets a CPI figure of 2% and expects that it may take two years before inflation declines to the target level – but this will clearly depend on the details of the Brexit process.