Coming down but still going up: the trouble with inflation

An imaginary basket of 700 goods and services bought by households has gone up in price by 2% in the year to May, down from 2.3% in the year to April.

In autumn of 2022, the consumer price inflation (CPI) rate peaked at 11.1%. Energy prices had soared in the wake of disruption to Russian oil and gas imports. Liz Truss’s tax-cutting mini-budget was piling more demand into prices.

The fall in price inflation does not mean that prices are falling. Some fall, but overall, the cost of that basket is now not rising as fast.

And while inflation is down and back on target, the past two years have left prices much higher than they were. Food, for instance, is 25% more expensive than it was. So for many whose income rise has not matched price increases, the cost of living pressures remain.

This month’s figures show food inflation down to 1.7% over the year to May, from 2.9% in the year to April. Easing that price inflation rate were bread and cereals, vegetables, sugar, jam, syrup, chocolate and sweets. Still going up were cooking oils, dairy and eggs.

The cost of buying a pet is easing, after the pandemic saw prices soar. Also bearing down on price inflation are package holidays, books, vacuum cleaners, fridges, freezers and washing machines.

Offsetting that has been the cost of petrol, with a litre of unleaded up 4p on May last year, though in that transport category, the average price of a used car has fallen by more than 11% in a year, with the unwinding of disruption to manufacturing of cars during the pandemic.