The rate of inflation faced by households fell to 1.5% in the year to May 2014, down from 1.8% in April. With the exception of the April figure, which is likely to have been influenced by the position of Easter, the rate of inflation has fallen each month since Autumn 2013. The latest information continues the trend of below 2.0% inflation during 2014.
Falls in transport services costs, notably air fares, were the largest reason behind the reduction in the rate. The timing of Easter in April this year is likely to have had an impact on price movements for these services. Other large downward effects came from the food & non-alcoholic drinks and clothing sectors. They came from a variety of product categories, most notably bread & cereals, meat, vegetables, soft drinks and garments, particularly women’s outerwear.
Partly offsetting these downward effects, price movements for motor fuels stopped the rate of inflation falling further. Average petrol and diesel prices rose slightly between April and May this year but each fell by over 3 pence a litre a year ago. Prices of games, toys & hobbies (particularly computer games) also rose this year but fell a year ago to offset the overall reduction in inflation.
To understand how inflation impacts on households it is worth looking past the monthly movements to focus on the sectors that contribute to the rate of inflation ie what makes up 1.5%, not what made inflation change from 1.8% to 1.5%. Prices in the housing, water, electricity, gas & other fuels sector currently have the largest upward effect on inflation, contributing over a quarter of the total. On the other hand, motor fuels and food & soft drinks currently have a downward pull on inflation. Average petrol prices were around £1.29 in May this year compared with £1.33 a year earlier while food & soft drink prices fell by 0.6% in the year to May.
CPIH, the measure of household inflation which includes the costs faced by owner occupiers, grew by 1.4% in the year to May, down from 1.6% in April.
Source: Office for National Statistics
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