This slowing in the rate of deflation is driven almost entirely by two price sectors
- Energy makes up 7.8% of the index and is up 1.9% on the month.
- Mortgage Interest makes up 6.7% of the index and is up 6.1% on the month.
Excluding these two categories, the remaining 85% of the index only contributed to a price rise of 0.11%. On the whole prices were unchanged in May. This gives us our measure of core inflation.
The rate of core deflation is not easing.
We can clearly see that overall CPI inflation rate has increased continually since the lows of October 2009. On the other hand the core inflation rate which excludes the effect of mortgage interest and energy has shown no such improvement. It was –2.8% in April and only moved to –2.7% in May. Tweet