UK inflation: CPI surges but has RPIX peaked?
Simon Ward
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CPI inflation of 4.5% in April was far above expectations, more than reversing a fall from 4.4% to 4.0% between February and March. The late timing of Easter depressed the March number and boosted April's reading, mainly via a surge in annual inflation of air and sea fares – this should reverse in May. This effect aside, a further fall in food inflation was a favourable surprise but was offset by a pick-up in housing services, reflecting rents and water / sewerage charges.
Overall, the "news" relative to the assumptions embodied in the inflation projection presented in a post last week is limited – any revision will await May figures, which should clarify the Easter effect.
The rise in CPI inflation was not confirmed by the previously-targeted RPIX measure (i.e. RPI excluding mortgage interest costs), which eased from 5.4% to 5.3%. RPIX assigns a lower weight to air and sea fares and a higher weight to car insurance – premium increases are slowing. House prices and council tax, additionally, are exerting a drag on RPIX relative to CPI. RPIX inflation has tended to lead in recent years – see chart.
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