According to Societe Generale’s Sam Cartwright, the United Kingdom's headline Consumer Price Index (CPI) remained steady at 2.8% year-on-year in May, which was 0.2 percentage points below the Bloomberg median estimate and 0.5 percentage points under the Bank of England’s (BoE) projection in the April Monetary Policy Report (MPR) [1]. Core inflation, however, edged up by 0.1 percentage points to 2.6% year-on-year [1].
The report highlights that stronger inflation in services and fuel was counterbalanced by weaker food and goods prices. Specifically, services inflation increased by 0.5 percentage points to 3.7% year-on-year, though this figure was still 0.2 percentage points below the BoE’s April MPR estimate [1]. Within the services sector, a positive base effect—stemming from the Office for National Statistics (ONS) correction to last year’s overestimated rise in Vehicle Excise Duty—added 0.25 percentage points to services inflation [1]. Additionally, the unwinding of Easter-related weakness in April airfares contributed a further 0.15 percentage points, while transport by sea added just under 0.1 percentage points to services inflation [1].
The overall inflation mix for May was thus shaped by robust services and fuel prices, offsetting the softness in food and goods categories. The data suggest that while headline inflation remains below expectations, underlying pressures in the services sector persist, influenced by one-off factors and base effects [1].
CONCLUSION
UK headline inflation in May remained below both market and central bank expectations, primarily due to offsetting trends between services and goods prices. Persistent services inflation, driven by base effects and specific sector dynamics, suggests ongoing underlying price pressures despite the softer headline figure.