For the first time in almost three years, the Bank of England's holy grail has been found: inflation for the year to May fell back to its hallowed 2 per cent target, from 2.3 per cent in April. Food prices, which have long been a black spot, did a lot of the heavy lifting to deflate the figure, having increased by just 1.7 per cent in the year to May compared with 2.9 in the year to April. This was cited as a key contributor by the Office for National Statistics (ONS).
But although the government will be rejoicing at having been granted a decent “retail offer” while out election campaigning on the nation’s doorsteps, we shouldn’t get ahead of ourselves. The price of a weekly shop is still up compared with a year earlier, and the damage from the peak of more than 19 per cent recorded last year is still in the figures. The average shopping bill is more than 25 per cent higher than it was at the beginning of 2022.
However, Capital Economics notes that food-producer price inflation stood at just 0.2 per cent in May. “Food-price inflation will probably soon fall to zero,” said the forecaster. Bring it on.
In total, eight of the ONS divisions contributed to the downward move, with the recreation and culture sector and furniture and household goods joining food as the stars of the show, offset by two risers; transport was the biggest nasty. Feeling any richer yet?
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