Societe Generale’s Sam Cartwright notes that UK Headline CPI stayed at 2.8% year-on-year in May, undershooting both Bloomberg consensus and the BoE’s April MPR projection, while core inflation edged up to 2.6%. He highlights that stronger services and fuel inflation were counterbalanced by weaker food and goods prices, with specific base effects and airfare dynamics driving services.

Services and fuel drive May CPI mix

"Headline CPI remained at 2.8% yoy in May, 0.2pp below the Bloomberg median estimate and 0.5pp below the BoE’s estimate in the April MPR, while core inflation rose by 0.1pp to 2.6% yoy."

"Stronger services inflation was offset by downside surprises in food and goods"

"Services inflation rose by 0.5pp to to 3.7% yoy, 0.2pp below the BoE’s April MPR estimate."

"Within services, a positive base effect, stemming from the ONS correction to last year’s overestimated rise in Vehicle Excise Duty, added 0.25pp to services."

"In addition, the Easter-related weakness in April airfares unwound, contributing a further 0.15pp to services inflation, while transport by sea added just under 0.1pp."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)