Despite being widely expected to fall, inflation stayed at 8.7% in May 2023, the same as the previous month, while median pay settlements remain at 6%.
The consumer prices index (CPI) in the 12 months to May 2023 stood at 8.7%, the same rate of growth as April, making it more likely that the Bank of England will increase interest rates tomorrow.
According to the Office for National Statistics, the consumer prices index including owner occupiers’ housing costs (CPIH) increased by 7.9% in the year to May, up from 7.8% in April.
The retail prices index (RPI), the measure most-cited by trade unions in pay negotiations, fell by 0.1 percentage points to 11.3% in the 12 months to May.
Inflation May 2023
Record regular pay growth outstripped by inflation in Spring 2023
Meanwhile, fresh pay data from XpertHR has shown that median pay settlements for the three months to the end of May 2023 stood at 6.0% for the fifth consecutive rolling quarter.
Sheila Attwood, XpertHR’s senior content manager, said: “We don’t expect to see any further upward movement in pay awards, although the slower rate of decline in inflation that is playing out may well leave pay awards higher than organisations had originally anticipated at this point in the year.”
Rising prices for air travel, recreational and cultural goods and services, and second-hand cars resulted in the largest upward contributions to the monthly change in both the CPI and CPIH.
Downward pressures included falling fuel prices, while prices for food and drink also led to an easing in the annual rates.
Chancellor Jeremy Hunt said: “We know how much high inflation hurts families and businesses across the country, and our plan to halve the rate this year is the best way we can keep costs and interest rates down.
“We will not hesitate in our resolve to support the Bank of England as it seeks to squeeze inflation out of our economy, while also providing targeted support with the cost of living.”
Core inflation – which removes energy, food, alcohol and tobacco prices from the CPI – stood at 7.1% in the year to May 2023, up from 6.8% in April, meaning it was at its highest rate in 31 years.
James Smith, research director at the Resolution Foundation think tank, said: “The latest data will reinforce market expectations of how high interest rates will go, and put more pressure on the Bank. This is bad news for anyone with a mortgage, who will be looking out for more positive signals before their current deal comes to an end.”
TUC general secretary Paul Nowak said: “Wage rises aren’t causing inflation, real pay is still lagging far behind where it needs to be even to get living standards back to where they were over a decade ago.
“Pushing interest rates so high that the economy is driven into recession will only make the current crisis worse. What working people need is a credible plan for sustainable growth, to get living standards and public finances back on track.”
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Alpesh Paleja, CBI lead economist, said: “The latest data also shows signs of stubbornness in more domestically focused price pressures, most notably in the recent strength of private sector wage growth. As a result, another interest rate rise from the Bank of England looks like a done deal, with the prospect of at least one further rise in August to fully bring inflation under control.”
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