The Office for National Statistics has said this morning (and I have related this to refer to the Consumer Prices Index, or CPI alone):
- The Consumer Prices Index (CPI) rose by 2.6% in the 12 months to March 2025, down from 2.8% in the 12 months to February.
- On a monthly basis, CPI rose by 0.3% in March 2025, compared with a rise of 0.6% in March 2024.
- The largest downward contribution to the monthly change in the CPI annual rate came from recreation and culture, and motor fuels.
- Core CPI (excluding energy, food, alcohol and tobacco) rose by 3.4% in the 12 months to March 2025, down slightly from 3.5% in the 12 months to February; the CPI goods annual rate eased from 0.8% to 0.6%, while the CPI services annual rate slowed from 5.0% to 4.7%.
Reeves will, of course, be trumpeting on the airwaves about this. She should not be.
As the ONS make clear, this fall in the rate is because a bad month, March 2024, has fallen out of the calculation. It is not because March 2025 was especially good. 0.3% in a month, when annualised, is clearly not that good. It's just decidedly better than 0.6%, which it was in March 2024.
And recall that April 2025 is not going to be good for inflation. Energy, water, rail fares, phones and a great deal else have gone up at way above the inflation rate in April 2025. The April 2024 inflation figure was 0.3%. It would be very surprising if that for April 2025 was that low. Reeves would be wise to keep her head down until the trend in inflation is really downward. I think that will happen. But not yet.
As usual, my advice is to take this data with a decided pinch of salt.
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The BBC says that economists expect the rate to “tick up again to around 3% over the coming months, and peak at around the 3.7% mark in the autumn”. Not sure which “economists” they’re talking to though…
https://www.bbc.co.uk/news/live/cdde3p81nglt?post=asset%3Aa6b731ad-c615-4542-a83c-ecb3f79f8eb9#post
There is an Alice in Wonderland quality to these statistics. Prices rose in March 2025, just not as fast as they rose in March 2024. Yet this is reported as inflation falling. Going up less quickly is still going up.
Whereas in February the report was that inflation was rising, when prices fell in January 2025, just not as fast as prices fell in January 2024.
This breathless obsession among the political and journalistic classes about small changes in such statistical monthly estimates is just childish.
Much to agree with, hence my title for the post
Lies, Damm Lies and Statistics……………..
Thank you for advancing interpretation of Reeves-speak.
With such a large complex data set why do they even talk about monthly figures.
When it clearly needs the context of time to see what’s really going on.
I would suggest that what is needed is a different set of figures for different purposes.
As the % annual increase for state benefits it needs to be an annual %, although whether the quoted annual inflation rate has any relevance whatsoever to the increased costs incurred by those in receipt of such benefits is more than questionable.
What I would like to see is a base of 100 at a certain date, perhaps 01/01/1995 and that index figure used every month, so it is easy to see, for example, an 18 month or 2 year change.
We can do that with the data now…
If they publicise the index number every month people may be less likely to believe that a drop in the rate of inflation is a drop in prices, and if they include the index figure for median earnings, state pension and single person benefits, it would be a lot easier to see how much ‘better off’ people aren’t year on year.
I think this IS good news; core, goods and services inflation was slightly lower than expected.
Now, next month will be a different story as various well telegraphed price hikes feed into the numbers… but we know that is coming. What we don’t know is how the global economic chaos will impact the data. Businesses will have to compete hard to sell their products/services and, while the April data will be higher, I suspect not as high as a simple feed through of energy/water/rail fares etc.. would suggest.
In short, I think the trend is already down. We will get “expected” blips but underneath that price rises will be “unexpectedly” low. We need a substantial rate cut at the next BoE meeting; “wait and see” might be a sensible policy for the Fed…. it is NOT for the BoE.
Ah, the fiction of CPI.
My water bill for this year has increased by 26.25%. I know for others it is worse than that. I’m seriously giving consideration at some point to not paying. Labour, when in opposition, were very clear that the cost of clearing up the mess should not fall on the public. Another lie. The water companies are quite literally taking the p-ss. They even have the nerve on their bill to say that the bonuses for those at the top are not paid for by customers, but by “investors” — no doubt just an accounting trick. I’ve had enough of them.
Add in rent (I was going to say mortgages as well, but at least for many, mortgage rates are now coming down. No such luck if you rent.), council tax, gas, electricity, travel, telecoms…
The whole system is just a con.
CPI means nothing to me. It has become a joke figure that only fantasist politicians like Reeves and Starmer think is true.
Labour, just like the Tories before them, play by the same inflation fiction rules. Never addressing the real issue of affordability and real inflation across a range of essentials needed just to exist.
I hear you about water, rent etc..
The problem is not so much with the data but the importance that is attached to it and how it is used. Everyone has their own “personal CPI” that reflects the basket of goods/services they buy. Perhaps pension/benefit uprating should be based on a “basics” basket of goods – it would certainly be higher than CPI.
For interest rate setters it is also complicated. Water prices will boost the CPI number next month and some might suggest that this higher CPI is a reason to delay rate cutes. On the contrary – it makes the case for rate cuts more acute. Higher water bills means less disposable income for everyone and this will squeeze spending elsewhere in the economy.
That is why policymakers need to “get out more” and see what is going on.
In short, care is ALWAYS needed when using economic data.
Agreed
Physicists put error bars on their experimental numbers. How pleasing it would be if the Office for National Statistics did the same.
And headline CPI (2.6%) is the same as it was in November last year, so worth nothing more than a shrug really. It’s wobbling about but not really changing.